IT Spending Cautious Among U.S. Enterprises

Below-budget November spending could indicate weaker recovery in 2004

Below-budget November spending could indicate weaker recovery in 2004

Stamford, CN — December 17, 2003 — Despite many signs of recovery in the U.S. economy, executives in the private and public sectors continued to demonstrate caution in their information technology (IT) purchases in November, according to the Gartner Technology Demand Index, an index included in a monthly economic indicator published by 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. The Gartner Technology Demand Index for November recorded a score of 81. An index value of 100 means businesses spent exactly what they had budgeted for the month. In October, the index totaled 85.

"Thus far, fourth-quarter spending does not show the strength needed to suggest a broad-based recovery across all categories of IT spending in early 2004," said David Hankin, senior vice president and general manager at Gartner. "Spending may surge toward the end of December if IT decision-makers commit remaining funds in 2003 budgets before the close of their fiscal year, but such an increase should not be considered an indicator of recovery early in 2004."

Forty-nine percent of respondents to the IT Watch study end their fiscal year in December. Of those companies, 67 percent reported they would lose any budget not spent by the end of 2003, while 30 percent said they would carry unspent 2003 funds into the 2004 fiscal year.

Of all companies stating they will roll uncommitted resources budgeted for IT spending in 2003 into next year, the majority (61 percent) said their policies permit them to spend dollars budgeted for 2003 anytime during the next fiscal year. Thirty percent are required to use the remaining budget by the end of the first quarter of 2004.

All technology sectors suffered a decline on the Technology Demand Index, and the IT services segment saw the biggest decline, dropping to 79 in November.

"Coming from a strong position earlier in the year, IT services has seen an erosion in both current spending and in projected spending in 2004," Hankin said. "We believe that much of the shortfall is the result of competitive pricing among vendors and new outsourcing options that have put considerable pressure on domestic service providers in North America."

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.