Study says IT spending stronger

New Gartner report suggests that IT spending this year may actually be stronger than last year's. The conclusion runs contrary to general market perception and contradicts a recent study released by Merrill Lynch.

Despite the carnage on the stock markets, spending on IT projects will actually be stronger in 2001 than it was in 2000, a survey released Tuesday, July 17, by research firm Gartner concluded.

In fact, Gartner said that a survey of 600 companies, with average revenue of $2.3 billion, showed that 56 percent of respondents plan to spend an average of 21 percent more on technology projects in 2001 than they did in 2000.

"While many IT vendors are having a difficult time right now, it's important to point out that this does not necessarily translate into trouble for the enterprise's IT spending budget," said Barbara Gomolski, research director of Gartner.

The firm's findings, based on a survey of 600 companies with an average revenue of $2.3 billion, seem to run contrary to general market perceptions. They also contradict a report issued earlier in the week by brokerage firm Merrill Lynch & Co., which found that close to 72 percent of chief information officers and chief technology officers expect their IT spending to either remain the same or slow in the second half of the year.

Gomolski outlined several possibilities for the differences in the studies. She noted that Gartner's study was based on interviews with 600 executives at larger firms, while Merrill Lynch's was based on interviews with just 50 CIOs and CTOs. She also said that some areas of the economy, such as manufacturing and utilities, are being hit much harder than others, and are experiencing a dramatic downturn in spending. Other sectors, such as finance and health care, have not been hit as hard, and continue to invest heavily in new IT projects.

A third factor is an apparent dramatic shift in spending. Companies are beginning to use outside service providers, such as application service providers, to host and manage more of their applications. That means companies that are not spending directly on new hardware or software purchases, so it comes up as a "hidden" IT expenditure.

"We believe there is a larger trend going on, where companies are getting out of the business of buying and maintaining their own hardware and software," Gomolski said. "This could be the start of a profound change [in the use of services] within the IT organization."

Brian Eckert, an executive vice president of computer services firm Dimension Data, which recently acquired Internet consultant Proxicom, agreed that corporations are outsourcing more of their applications and application management. However, he was reluctant to say the increase in interest was translating immediately into revenue.

"Companies are going through a very careful buying and planning process. They're taking longer to make decisions," Eckert said. "I see that approach continuing for the short term."