IT spending will increase, but at a reduced rate as companies focus on "running the existing IT infrastructure," according to one industry analyst.
Posted Dec 22, 2006
Enterprise IT spending is predicted to take a slight dip in 2007, according to new Gartner research. While spending among enterprises is still expected to increase, it won't be at the same pace as previous years. Organizations with more than $1 billion in revenue have reforecast their IT spending increase for 2007 to 2.8 percent, according to a new Gartner Consulting Worldwide IT Benchmark Report. These spending projections are down from research collected by Gartner during the first half of 2006. At that time, IT spending for 2007 was forecast to grow at 6 percent.
"A number of factors have combined to force enterprises to lower their IT spending forecasts from the first half of 2006," said Jed Rubin, director of Gartner Consulting, in the study. "Looking back at the distribution of spending in 2006, enterprises spent more to support core business operations." Rubin says this includes spending to support increasingly complex infrastructure and applications requirements, rising energy costs, regulatory requirements and other non-discretionary spending to keep the business running. This increased "run the business" spending has also consumed budget resources that were originally earmarked for more strategic and transformational investment, and IT leaders are now planning to optimize their spending in these areas in the year to come.
According to the research, growth and transformation remain the top priorities for enterprises in 2007, but any new investments need to be funded by a significant reduction in existing run-the-business spending. To support these priorities, IT organizations will subsequently need to reduce their run-the-business budgets by nearly five percent in 2007.
The research shows that IT spending forecasts differ by industry. In 2007, the most significant difference in IT spending growth will be in the media industry, up to nearly 7 percent from 4 percent in 2006. The consumer products industry will see the biggest decline in IT spending in 2007, as spending is expected to decline by nearly 6 percent, down from an 8 percent increase in 2006.
The predictions fall in line with a recent Forrester study that predicts reduced spending for 2007. After two consecutive years of 8 percent growth, global purchases of IT goods and services will slow to 5 percent in 2007, reaching $1.55 trillion in sales according to the Forrester report, "Global IT Spending And Purchases Forecast, 2006--2007." U.S. purchases of IT goods and services will also grow 5 percent in 2007, the slowest rate of growth since 2003, but better than Forrester had projected a year ago. "Sales in the U.S.--the largest single technology-buying market in the world--will be hard to come by as CIOs reduce or delay IT purchases," says Andres Bartels, vice president of Forrester Research, in the study. "The single most important variable impacting future technology spending worldwide will be the state of the U.S. economy."
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