U.S. IT Spending in Line with Budgets for January

Enterprises increased technology investments at start of year, see rise for 2004, Gartner index shows

Enterprises increased technology investments at start of year, see rise for 2004, Gartner index shows

Stamford, CT — March 12, 2004 — U.S. enterprises have started 2004 with new optimism as information technology spending returned to budgeted levels in January, according to a technology spending index published by IT consultancy Gartner.

IT spending among U.S. enterprises had been under budget since the March 2003 launch of Gartner's Technology Demand Index (TDI), an index included in a monthly economic indicator published by the consultancy.

But the TDI for January recorded a score of 100 for current spending, which means businesses spent exactly what they had budgeted for the month. The index is based on interviews with more than 600 IT decision makers in small, midsize and large public and private organizations.

"Stable current spending reported in January means that projected increases in 2004 budgets are beginning to flow through organizations," said David Hankin, senior vice president and general manager at Gartner. "This bodes well for the spending increases foreseen by many IT decision makers and suggests that companies are moving forward with their IT strategies. These spending increases are not attributed to a 'January effect,' because half of the respondents are managers in enterprises with fiscal years that do not coincide with the calendar year."

According to the Gartner index, actual IT spending was on par with budgets across all technology sectors (hardware, software, networking/telecom, IT services, outsourced services and internal staffing), a stark contrast to under-budget spending reported in the fourth quarter of 2003.

"Our data suggest that the IT spending confidence of corporate IT buyers hit bottom last year, and their confidence is trending up," Hankin said. "Still, the upward bounce is subtle. We have shifted from stall mode to controlled spending."

Two segments of external IT services spending were higher than expected. These categories are IT management (which registered a TDI of 110) and process management (TDI of 113). The current TDI was also unexpectedly high for tablet PCs (TDI of 122), desktop PCs (TDI of 117) and notebooks (TDI of 110).

"After successive years characterized by deferred external spending on services, organizations are buying PCs and engaging in external organizations to manage IT projects at above-budget levels," Hankin said.

When examining projected IT spending, respondents said that IT budgets for 2004 will grow across the board, with the software segment leading the way.

"The demand for application development/integration and security applications will grow significantly faster than for all other software categories," Hankin said. "Driving the former is the development of Web-based applications for internal communication/reporting and integration of existing applications. Increased demand for security software is inconsistent with relatively flat projected budgets for security hardware."