Overall IT Spending Slows, But Outsourcing Grows

May 8, 2001

Colin C. Haley

Information technology (IT) budgets will rise a modest 7 percent this year, compared to 11 percent last year, as companies brace for tough economic times, according to a new survey from Boston investment bank Adams Harkness & Hill (AH&H).

The "Spring 2001 IT Survey" polled more than 300 executives across industry sectors about planned hardware, software and services purchases. Results were released at AH&H's annual Technology Services Conference on Monday.

Belt-tightening by large companies is the primary reason for shrinking IT budgets. In addition to watching the bottom line, these firms spent the most last year, and may need fewer upgrades.

The numbers aren't dire for the entire industry. Take outsourced services such as Web and e-commerce design. While expenditures in this category will slip 2 percent for large companies, small and medium-sized businesses will boost purchases 13 percent and 8 percent, respectively.

Another area of growth is managed infrastructure services including data storage, collocation and security. While penetration remains low, the survey indicates there are two new buyers for every current user of managed hosting and enhanced management services.

"Outsourcing is a lower cost alternative and addresses a lack of technical workers," AH&H analyst Alex Arnold said.

Other notable survey findings show:

  • Online strategy remains a high priority for nearly all of the respondents. But name recognition among struggling Internet consultancies is surprisingly low despite the billions of dollars spent on marketing and advertising.

  • About 70 percent of companies lack a wireless strategy. Early adopters are in the financial service industry who want to connect with mobile users. Other sectors don't believe the return on investment is sufficient to make the investment. Says Arnold, "We're not seeing the growth to justify the hype."

    Editor's note: Colin Haley is managing editor of


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