U.S. Enterprises Increased IT Spending over Budgets in February - Survey

Gartner Technology Demand Index shows tech spending for year on track for 10 percent gain; services, software strongest

Gartner Technology Demand Index shows tech spending for year on track for 10 percent gain; services, software strongest

Stamford, CT — April 12, 2004 — U.S. enterprises are gaining confidence in the economy, and many of these companies spent above their budgeted IT dollars in February, according to the Gartner Technology Demand Index (TDI), an index included in a monthly economic indicator published by the analyst firm Gartner Inc.

Based on interviews with more than 400 IT decision makers in small, midsize and large public and private organizations, the Gartner TDI for February recorded a score of 105 for current spending, up from 77 in December and the first time the monthly index has exceeded 100 since the launch of TDI in March 2003.

An index value of 100 means businesses spent exactly what they had budgeted for the month. An index of 105 means a net 5 percent more businesses are spending above budgeted levels for 2004.

"At the end of 2003, our respondents had budgeted for a 10 percent increase in IT spending in 2004," said Scott Evans, managing vice president at Gartner. "Since we have seen stable IT budget and spending ratios for the first two months of this year, this leads us to believe that U.S. enterprises are on track to boost IT spending by 10 percent in 2004."

"The TDI showed the strongest budget increases were reported in IT services and software, while 2004 hardware budgets were reported to be flat," said Brian Smith, research director at Gartner. "Given the continued decline in hardware pricing, we view even flat spending for hardware as a good sign, and we forecast a modest dollar growth rate for that sector."

IT Watch respondents are more optimistic about 2004 spending levels than official Gartner IT spending forecasts, according to the consultancy. Gartner said that as the year progresses, it will closely monitor how actual spending evolves against budgeted spending for the year.

The IT Watch Vendor Demand Index measures IT decision makers' purchase preferences across more than 450 vendors by sector and product. As managers feel more confident about an economic recovery, some of the larger vendors are experiencing a subtle decline in demand, while a number of smaller vendors are seeing an increase in demand.

"Risk avoidance is no longer the dominant driver for vendor selection," Evans said. "Examples of smaller vendors demonstrating a consistent upward swing include FileNet, Check Point and Amdocs. Trends in their respective areas of specialization suggest a shift in openness toward smaller vendors in document management and security as potential product and service providers."

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.

Additional reporting on the Gartner Technology Demand Index from SDCExec.com: