Gartner: IT Spending on the Rise

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IT spending is showing signs of strengthening in the second half of this year, leading analysts to finally hope for a turnaround in 2004.

A new report from Gartner, Inc., a major industry analyst firm, shows IT managers are still spending below budget, but July was the third month in a row that showed spending that was near par with what they had in their coffers.

The analyst firm ranks IT spending on its Gartner Technology Demand Index, in which a rating of 100 would mean the company spent exactly what it had budgeted for that month. A Gartner poll of 20,000 member companies showes that businesses were still spending below their budgets in July but ranked a 95.1 on the scale. After hovering around 80 in March and April, the index has remained above 90 since then.

”The underlying data still reflects a conservative market that is focused on cost control,” says David Hankin, a senior vice president and general manager of Gartner. ”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. Based on the trends we see, we are optimistic that spending will return to or exceed budgeted levels in the fourth quarter of this year.”

Spending on software has shown a healthy increase, even exceeding budgeted levels.

Gartner reports that the software segment scored a 107.3 in July. The design and engineering software market has been particularly strong.

”The strong current demand in the design and engineering area is primarily due to the growing interest in new standards, such as J2EE (Java 2, Enterprise Edition), .NET and Web services, which require new tools for building applications,” Hankin adds.

This new Gartner report on the state of IT spending is in line with other recent reports.

This past April, IDC, a Massachusetts-based industry analyst firm, noted that in a survey of 18 vertical markets, business executives reported a slight improvement in their confidence in the economy. And IDC analysts noted that while business outlooks didn’t directly point to a change in IT spending, they do help gauge the industry’s tone.

The average IT budget growth rate for this year, according to IDC, will be 3.2 percent. The analyst firm also reports that North American businesses spent 5 percent of their revenue or operational budgets on IT last year. That share is expected to grow in 2003, largely because other departments than IT are expected to suffer larger budget cuts.

IDC’s survey also showed that 79.4 percent of companies surveyed said total IT spending in 2003 will mirror 2002 or increase. IT spending priorities include CRM, systems infrastructure and industry-specific solutions.