Things Are Looking Up

IDC: Renewed optimism in business prospects to fuel 2004 IT budget growth

IDC: Renewed optimism in business prospects to fuel 2004 IT budget growth

Framingham, MA — April 14, 2004 — Companies are more optimistic about their business prospects than at any time in the past two and one half years, a new study from global market intelligence and advisory firm IDC indicated.

After a steady decline in optimism from the summer of 2001 through the winter of 2003, findings from IDC's survey of 1,341 North American decision makers show a jump of almost 15 percentage points in information technology (IT) and business executives who stated they are currently "positive" or "very positive" about their business prospects. IDC said it expects this turn in business confidence will help fuel IT investments in 2004.

The study also revealed that 42.6 percent of the organizations surveyed intend to boost their total IT budget in 2004 — a significant improvement compared with 2003 levels (31.1 percent) — and that a relatively small number plan to decrease spending. Compared with last year, a much lower incidence of companies that report not knowing in which direction their IT spending will go in 2004 signals that cautiousness is easing and a renewed commitment to IT investments is emerging.

"IT and business executives are increasingly optimistic about their company's business prospects and this optimism is contributing to a healthy outlook for IT purchases," said Lucie Draper, program manager, Enterprise Technology Trends. "However, cost control remains a top priority, even though the uncertainty has diminished somewhat. And spending increases will vary from one vertical industry to the next, depending on each market's attitudes and requirements."

Among the key findings presented in the IDC study are the following:

* The most IT intensive industries — defined by the mean share of their revenue that is spent on IT products and services — include the professional services and telecommunications industries.

* In the banking and business and legal services industries, the proportion of companies that expect to increase IT budgets in 2004 is greater than in the aggregate market. Further, the average increase in that budget is significant among banking and credit institutions.

* More companies in the banking, telecommunications and resources industries than in other vertical markets are shifting IT budget dollars from internal to external spending for 2004.

The IDC study, "Pinpointing 2004 Vertical Market Opportunities: IT Budget Directions and IT Budget Allocation," presents IDC's most recent findings on vertical markets' IT budgets. The research addresses IT spending trends and budget directions for 2004, including changes from 2003 in total IT spending, IT spending per employee, share of revenue allocated to IT spending and IT budget allocation.

The document is based on results from IDC's latest Enterprise Technology Trends (ETT) Survey, conducted with end-user organizations between November 2003 and January 2004. IDC's ETT research is based on an ongoing panel of business and IT executives who provide firsthand insight into the adoption and usage of information technologies at North American organizations, including the public sector.