IT Spending to Increase in Second Half of 2003

IT Spending to Increase in Second Half of 2003

MADISON, WI – Information technology analysts, consultants and executives are reporting that there are early indications that IT spending will increase in the second half of 2003, which provides the necessary first steps for a turnaround in IT spending for 2004.
Steve Haroldson, chief technology officer for CUNA Mutual Group said, “Technology spending is showing signs of recovery. I talk regularly with technology vendors, and over the last year I’ve asked them how their business is doing. In the past 6 months, the answer to that question has become more upbeat, especially recently.”
According to a weekly poll drawn from a 20,000-member Gartner research panel of IT decision makers from small, midsize and large businesses, U.S. businesses spent below their budgeted levels, recording a score of 95.1 on the Gartner Technology Demand Index for July (an index value of 100 would mean businesses spent exactly what they had budgeted for the month). After hovering around 80 in March and April, the Index has remained above 90 for the past three months, flirting with the key 100 level. This demonstrates that IT demand is slowly returning to budgeted spending levels. Gartner, Inc. is a research and advisory firm that helps companies leverage technology to achieve business success
“The underlying data still reflects a conservative market that is focused on cost control. The overall positive trend is offset by occasional negative data points, which we anticipate will continue to decline in frequency through the end of the year,” said David Hankin, senior vice president and general manager of Gartner. “Based on the trends we are seeing, we are optimistic that spending will return to or exceed budgeted levels in the fourth quarter of this year.”
“CUNA Mutual is continuing to hold the line. After a very rapid increase in technology investments supporting the internet enabling of our businesses in years 2000 through 2002, this year we have modestly scaled back on our IT spending. I have seen that same trend of increasing IT spending in the national CIO surveys I participate in and in the technology trade press. While cautiously optimistic, this general trend will continue and pick up steam in latter 2003,” said Haroldson.
Industry consultants are also seeing indications of an improving IT economy. James Jackson, VP of sales and marketing for Comprehensive Computer Consulting said, “We are seeing a gradual, but significant pick-up in IT spending and overall projects in the 3rd quarter. However, it may be a little early to tell how sustained the recent up-tick will be. IT executives will definitely be much more cautious as funding becomes more available than they may have been in the past 12-24 months. And with good reason. For many firms, the work did not go away, just the funds to get it all done quickly. There is a great deal of pent-up demand and employees are being asked to do more in less time. Keeping up with the “;hottest trend” in IT may be a thing of the past. Focus is now shifted to increased efficiency and leveraging existing information systems to their highest potential. “
Byrne Chapman, VP Information Services for American Family Mutual Insurance sees the trend of increased IT spending continuing at his company.” American Family tends to base its’ IT budget on the initiatives we feel will support the Company’s business needs and deliver value to our customers,” said Chapman. “As a result, our IT budget has actually increased in recent years. As for 2004, we’re just starting the budget process, and again we anticipate funding will be linked back to the Company’s strategic initiatives.”
In July, software spending went above the budgeted parameters (see Table 1), as the software segment scored 107.3 on the Technology Demand Index. One of the application areas that has shown the strongest current demand is the design and engineering segment.
“The strong current demand in the design and engineering area is primarily due to the growing interest in new standards such as J2EE, .Net and Web services which require new tools for building applications,” Hankin said.
Table 1
Gartner Technology Demand Index for July 2003

Sector Spending Index
Hardware 88.8
Software 107.3
Networking and Telecommunications 89.1
IT Services 95.5
Aggregate Overall IT Spending 95.1
Note: An index of 100 would mean actual spending
totaled the projected budget for the month.Source: Gartner (August

The Gartner Technology Demand Index measures IT decision makers’ purchase preferences across more than 400 vendors by sector and product. Vendors ranked high by this measure stand to gain the most in demand in 2004 relative to 2003. Large vendors with strong brands, such as Microsoft, Dell, Cisco and IBM dominated the vendor rankings (see Table 2).
Table 2
Gartner Vendor Demand Index Top 20

Vendor Sector, Product 2Q03 Ranking 3Q03 Ranking (thru July)
Dell Hardware, Servers 19 1
Microsoft Software, Systems Applications 12 2
Microsoft IT Services, Software Maintenance and Support 1 3
Microsoft Software, Back Office Software 11 4
Microsoft Software, Collaborative and Personal 6 5
Microsoft Software, Application Development, Integration, and Deployment
4 6
Dell Networking and Telecom, Enterprise Equipment 33 7
Cisco Systems Networking and Telecom, Infrastructure Equipment 3 8
Dell Hardware, Desktops, and Workstations 16 9
Dell Hardware, Notebooks and Laptops 20 10
IBM IT Services, Application Development and Integration Services 32 11
Dell Hardware, Input/Output Hardware 70 12
Cisco Systems IT Services, Hardware Maintenance and Support 10 13
IBM IT Services, Software Maintenance and Support 25 14
IBM IT Services, Consulting Services 35 15
IBM Software, Systems Applications 64 16
Hewlett-Packard IT Services, Software Maintenance and Support 74 17
Northrop Grumman IT Services, Application Development and Integration Services 2 18
IBM IT Services, IT Management 39 19
AT&T Wireless Networking and Telecom, Mobile Services 72 20
Note: 3Q03 rankings include survey results from
only the first month of the third quarter. Source: Gartner (August

The Gartner Technology Demand Index is a component of part of Gartner IT Watch. Gartner IT Watch uses results from weekly polling of the 20,000-member IT decision maker panel to produce an early warning indicator for investment professionals and vendors. Gartner IT Watch captures short-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.