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IT Spending Stabilizes
Forrester: 82 percent of companies to maintain or increase budgets in second half of 2002; surprising traction for Web services
Posted Aug 6, 2002
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IT spending will perk up slightly over the rest of the year, according to a Forrester report entitled, Benchmark America: Business Technographics Data Overview. "It's still not a pretty picture, but it's stabilized somewhat," says Forrester analyst Tom Pohlmann. "There are still rough patches for technology vendors." Forrester's survey indicates companies will spend 2.3 percent more on IT in 2002 than in 2001; 63 percent of companies will stick to existing budgets for the second half of 2002, with another 19 percent planning to raise budgets; and only 12 percent of companies plan to cut budgets, while the remaining 6 percent aren't sure. On the CRM front, the report points out that among some companies considering buying e-business applications, vendors aren't necessarily a part of the picture. For example, 11 percent of companies plan to build their own application in the second half of 2002. This is second only to the 25 percent who are considering sector standout Siebel. This doesn't mean that 11 percent of companies are rushing out to build enterprise-wide initiatives on the scale of salesforce automation, says Pohlmann. "It's probably more niche; very specific pieces of a CRM solution, like custom campaign management." Pohlmann cites historic CRM implementation failures as a reason behind these companies' desire to build out some part of their CRM stack. In business intelligence (BI), on the other hand, prospects are much more likely to go with software vendors. In the second half of 2002, 23 percent of companies (including 40 percent of business services and 32 percent of chemicals and petroleum companies) plan to buy BI products, with the top three vendors being Cognos, Business Objects, and SAP. BI is increasingly important, says Pohlmann, because "There's more riding on any decision in any business. There's a ton of existing business info, it's time to pull it together into a cohesive picture to make the right calls." As of mid-2002, the top five IT priorities are server hardware, network hardware, technology consulting, storage hardware, and bandwidth. E-business software and applications are further down the list, with enterprise portals and BI products leading. As for who's doing the buying, Forrester claims: "With the exception of enterprise resource planning, midsize firms are less likely to buy new technology than the Global 3,500 -- even though 8 percent more of them will raise budgets."
The reason, says Pohlmann, is that smaller companies are more likely to spot a need and fulfill it right away. "There are a lot of unplanned purchases, not necessarily big ones. A bigger firm will plan more for the future," he says. While BI is high on the list for future purchases, there's another technology in widespread current use -- Web services. Eleven percent of companies have already completed Web services implementations, 13 percent have a rollout underway, and 17 percent are in pilots. Another 30 percent are considering Web services, while 22 percent have no plans and the remainder doesn't know. The data surprised Pohlmann, who says that Forrester didn't expect this much traction in Web services. But Web services promise to help IT implementations stay on time, while keeping costs low. Successful implementations, however, vary by industry. According to Forrester, retail is 1.42 times more likely than the average industry to have successful IT projects. Chemicals and petroleum is second, at 1.33, with financial services at 1.26.
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