The Roundup: Tech Spending Preps for Recovery

Dec 19, 2001

David Aponovich

Tech Spending: Ready for Recovery in 2002
A survey of U.S. and European CIOs, CTOS and other IT executives by CyberAtlas Research finds evidence that the decline in technology-related spending has bottomed out and that the industry is poised for a recovery beginning in mid-2002.

CyberAtlas surveyed two panels of executives, one from large corporations and one from small to medium-sized businesses.

Click here for information on ordering the complete report, "IT/IS Industry Forecast 2002: U.S. and Europe."

Among the survey's key findings:

    Based on 2001 mid-year budget adjustments, CyberAtlas believes that IT/IS spending in the U.S. and Europe has hit rock bottom. It forecasts:

    • IT/IS capital spending in the U.S. and Europe will increase by about 2.4% by mid-2002.
    • European IT/IS budgets grow 1.5% during the first six months of the year.
    • U.S. IT/IS budgets will remain almost unchanged, increasing less than one percent through the second quarter of 2002.

    • Sales for the global IT/IS industry will hit $552.5 billion in 2001; 46.5% of sales will originate in the U.S. and 28.5% in Europe. These regions account for nearly 75% of the world's IT spending.
    • The average Fortune 1000 firm will spend just under $50 million on IT/IS operations this year. The average small/medium enterprise with $15 million in annual sales will spend about $765,000 on IT/IS operations.

    With 23% of Fortune 1000 firms and SMEs reporting that IT/IS budgets were trimmed mid-year 2001, the many did so by cutting labor expenses:

    • Of those CIOs responding that IT/IS budgets were decreased mid-year 17% indicated they had reduced IT staffing.
    • Of the SMEs responding that budgets were decreased mid-year, 21% indicated they had cut IT/IS staff.

    IT Investments Linked to Savings, Risk Reduction
    New reports from Giga Information Group show that the slowing global economies and the Sept. 11 attacks continue to have tangible effects on IT trends at the corporate level.

    Giga (Cambridge, Mass.) indicates that the new IT trends favor cost savings and extracting more value out of existing investments. In general, new technologies and major paradigm shifts in the enterprise have been shelved in favor of leading-edge technologies.

    While companies are still investigating new technologies, they are "much more careful in what they attempt to deploy, making rapid incremental changes that show near-term value," says Giga VP and Research Manager Marc Cecere. He cites an "increased focus in having CIOs act as leaders in business rather than senior technologists. They have been asked to help guide the business in its use of technology while still providing utility-like service."

    Giga reports that major issues facing IT decision-makers are: The economic slowdown (and pressure to squeeze more value out of existing resources); demand for improved security; high demand in key skill areas (project and account managers, J2EE); greater need for consolidating and integrating systems; and a requirement of short-term payback for IT investments.

    IP VPN Outlook Healthy
    Tech research firm IDC reports that the IP virtual private network services market is poised for rapid growth in the U.S. 2001 and beyond, on both the demand and the supply sites.

    IDC (Framingham, Mass.) finds in a recent report that the total market for IP VPN services will grown from more than $5.4 billion in 2001 to approximately $14.7 billion in 2006, a compound annual growth rate of 22%.

    The carrier market will grow to over $5.3 billion in 2006. The do-it-yourself market remains the largest provider of IP VPN services, expected to grow to nearly $9.4 billion in 2006.

    Like other segments of the IT economy, the economic slowdown has had an effect on IP VPN deployment in 2001. Many companies have slowed their implementation plans. The trend will continue in 2002, but IDC expects "dramatic growth" thereafter.

    Data from IDC's WAN Manager Survey show that IP VPN's "are maturing and have taken their place as a mainstream wide area network option for business."

    Online Sales Jump in November
    Online sales hit $4.9 billion in November, a jump of 36% from October's level of $3.6 billion, according to a report from Forrester Research and Greenfield Online.

    The Forrester Online Retail Index finds that the number of households shopping online increased to 16.8 million in November from 13.7 million the previous month. Consumers spent an average of $293 per person in November versus $265 in October.

    The top six spending categories for November: airline tickets ($690 million), apparel ($405 million), computer hardware ($388 million), hotel reservations ($339 million), consumer electronics ($317 million) and toys/videogames ($306 million).


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