Gartner: U.S. Enterprises Poised to Increase IT Spending in 2004

Technology Demand Index shows companies have leftover budgets from 2003 to add to this year's spending allocations

Technology Demand Index shows companies have leftover budgets from 2003 to add to this year's spending allocations

Stamford, CN  February 6, 2004  After enterprises held back on spending all of their IT budgets at the end of 2003, all vertical markets are prepared to spend at or above their 2004 IT allocations, according to the Gartner Technology Demand Index, an index included in a monthly economic indicator published by the analyst firm Gartner Inc.

According to a weekly poll of IT decision makers in small, midsize and large public and private organizations, U.S. enterprises continued to spend below their budgeted levels in 2003. The Gartner Technology Demand Index for December recorded a score of 77. An index value of 100 means businesses spent exactly what they had budgeted for the month.

"Organizations were increasingly reluctant to part with unspent IT budget dollars throughout the last quarter of 2003," said David Hankin, senior vice president and general manager at Gartner. "There was no 'flush' of budget spending at the end of 2003. Low year-end spending was the rule across all technology sectors, organization sizes and vertical markets."

However, projected spending estimates for the Technology Demand Index suggest strong growth in IT demand in 2004 in organizations of all sizes. Gartner analysts expect growth to be strongest in the public sector, technology manufacturing/communications, and health services.

When examining IT spending by technology sector, all of these segments are forecast to experience an increase in spending, but the reasons will vary from replacement purchases to maintenance fees.

In the software sector, much of the increased spending will be channeled into maintaining current software programs, with some increases for personal productivity and information management software.

"Other new spending will be channeled to existing enterprise software vendors that are exerting pressure to move users to new versions and raising maintenance fees," Hankin said. "For example, more than half of SAP's nearly 20,000 customers were faced with the termination of standard application support by the end of 2003, or an option to extend support through 2004 for an additional 2 percent in maintenance fees. PeopleSoft is auditing J.D. Edwards' customers and exerting pressure on enterprises to purchase new licenses based on PeopleSoft's licensing model."

In the hardware sector, the spending growth rate does not appear to show much of a spending increase, but there will be more unit sales. Continuing price declines in hardware will alter some of the growth rates. Respondents are planning to increase spending on mobile connectivity devices, such as handhelds and notebooks. Desktop PC and storage spending is trending downward.

The Gartner Technology Demand Index is an offering within Gartner IT Watch. Gartner IT Watch uses results from weekly polling of 25,000 IT decision makers to produce an early indicator for investment professionals and vendors of IT spending trends. Gartner IT Watch captures short-term and long-term attitudes toward investment in IT products and services, and reflects anticipated changes in spending trends because of current events and broader economic factors.

Analysis is provided monthly for the overall IT market and is further broken out to provide insight into current and projected spending in vertical industries. It also identifies vendors and products that will lead recoveries or play a shaping role in IT spending patterns.

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