IT Spending Shows Signs of Life

Several IT sectors are actually boosting spending this year, with a few surprises among the growth areas.

Signs of an economic recovery continue to pop up, the latest being research that shows IT spending is on the rise in some sectors, while a separate report shows a big jump in chip sales.

IT research and advisory firm Computer Economics (CE) issued its 20th annual survey on IT spending and found several sectors are actually increasing their budgets over last year, with a few surprises among the growth industries.

Both capital investment and operations are down, although operational cuts are often proving less severe.

Capital investment is not a pretty sight and the major hardware suppliers have the dropping revenues to show for it. It was flat year-over-year last year and is flat again this year, according to John Longwell, a spokesman for Computer Economics.

"You are seeing continued restraint and reduction in spending on new projects and capital," Longwell told "This year we're also seeing that expense cutting is moving into the operational budget. It seems to be across the board spending. Some areas jump out. There's less spending on areas like training."

Yet operational budgets remain less impacted by cost-cutting. For instance, CE found that only 38 percent of firms surveyed are cutting their IT operational spending. The company found 57 percent of IT managers feel they are adequately funded, and 45 percent of organizations are increasing IT operational spending over the prior year.

The percentage of IT organizations increasing their annual budgets is much better than in 2002 level at the height of the dot-com implosion and spending stopped dead due to IT overspending. Back then, only 36 percent of firms increased IT spending.

On the plus side, CE found that banking and finance, of all groups, is now increasing its spending, along with health care providers, professional and technical service firms and utilities and energy.

Banking and finance spending is expected to grow around 4.9 percent this year, while health care providers will increase their spending by 4.7 percent, professional and technical service firms will grow 4.0 percent and utilities and energy are up 1.3 percent.

Each sector has a different reason for increasing their spending. Banks and financial institutions, while hit hard by the recession, have been busy with mergers, acquisitions and picking up assets, and need to spend money getting everything working right, Longwell said.

The medical field is one of the few not hit by the recession and there is still a great deal of investment in upgrades and improving their systems that need to be done, Longwell said. Utilities will also need the equipment for buildout as well.

The sectors showing the sharpest decline in median IT operational spending are discrete manufacturing, down 5.5 percent, process manufacturing, down 2.5 percent, and retail, down one percent.

"The positive news is that this recession is not as acute in terms of IT spending as the 2001 recession, which was lead by the technology sector," said Computer Economics President Frank Scavo in a statement.

The annual study is based on an in-depth survey of more than 200 IT executives who provide detailed breakdowns of their budgets, staffing, and technology adoption plans for the 2009-2010 period. The survey sample includes a roughly equal number of small, medium, and large enterprises. The respondents are stratified according to 12 industry sectors to provide a representative sample of IT organizations across all industries.

Hot chips

In other news for hope, worldwide sales of semiconductors rose to $16.5 billion in May, an 5.4 percent increase over April sales, according to the Semiconductor Industry Association (SIA). Of course, those sales were still 23.2 percent lower than May 2008 sales, which hit $21.5 billion.

However, it continues an upward trend in chips sales. "The May sales numbers reflect the third-consecutive month of sequential growth for the semiconductor industry," said SIA President George Scalise in a statement. "The sequential monthly increases lead us to be cautiously optimistic about a return to normal seasonal patterns for the industry going forward."

Japan led the way, with a 7.2 percent increase. Asia-Pacific was right behind it with 6.7 percent. The Americas rose 3.9 percent while Europe was almost flat at 0.4 percent growth.

Year-over-year, sales in the Americas are down 19.4 percent, Europe is off 34.6 percent, Japan is down 35.1 percent and Asia-Pacific is off 15.9 percent. So recovery is still some time off.

Article courtesy of

Tags: chips, dot-com, mergers, semiconductor

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