'Caution' Remains CIO Watchword

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IT budgets should rebound somewhat during the coming year, though the timing of a recovery is difficult to pinpoint, two new reports conclude.

Over the next 12 months, companies expect to increase their IT spending 5.2 percent, up from the 4.6 percent expectation last month, according to a CIO Magazine poll of 370 IT decision-makers, most of whom work for North American companies.

Companies with less than 5,000 employees appeared more willing to spend than their larger counterparts; perhaps owing to pressure from investors to control costs.

Nearly 43 percent of panelists indicated continued weak corporate profits were the number one brake on spending. Other top vote getters included: tight finances, 24.6 percent; enough capacity, 23.5 percent; and less competition, 2.7 percent.

Part of the uptick will come from companies replacing PCs. Nearly 54 percent of respondents are in the midst of upgrading a significant number of their machines, or are planning to do so soon. Another 12.5 percent just completed the process.

This figure resonates with analysts at Deutsche Bank Securities, who have long held that the “PC replacement cycle will be somewhat gradual and commence in the 2002-2003 time frame.”

While the timetable may be gradual, the CIOs’ inclination to upgrade will be welcomed by PC makers who have endured a difficult two years as cost-conscious businesses and consumers delayed or canceled new purchases and made due with older models, despite advances in processor speed and promotional offers.

Overall, however, the outlook for computer hardware (desktops, notebooks and servers) is decidedly mixed, the CIO survey concluded.

So what does it all mean for an IT sector recovery? DB’s analysts say don’t look for anything dramatic during the first three months of 2003 “largely due to continued weak corporate profits and comments from many of the companies we cover.”