IT Spending: No Instant Recovery

Despite many signs of recovery in the U.S. economy, executives in the private and public sectors continued to demonstrate caution in their IT purchases in November, according to the Gartner Technology Demand Index (GTDI), an index included in a monthly economic indicator published by the research firm. According to a weekly poll of IT decision-makers in small, midsize, and large public and private organizations, U.S. enterprises continued to spend below their budgeted levels. The GTDI for November recorded a score of 81. An index value of 100 means businesses spent exactly what they had budgeted for the month. In October the index totaled 85. David Hankin, senior vice president and general manager at Gartner, says that the industry may see a sales spike through the end of the month in all IT areas, including CRM, but that that does not indicate there will be robust sales through the first quarter of 2004. Most organizations we polled have a use-it-or-lose-it budget situation," he says. "They cannot rollover their IT budget if it is not spent in 2003, so they will make some last-minute IT buys." Forty-nine percent of respondents to the IT Watch study end their fiscal year in December. Of those companies 67 percent reported they will lose any budget not spent by the end of 2003, while 30 percent said they will carry unspent 2003 funds into the 2004 fiscal year, according to Hankin. Of all companies stating they will roll uncommitted resources budgeted for IT spending in 2003 into next year, the majority (61 percent) said their policies permit them to spend dollars budgeted for 2003 any time during the next fiscal year. Thirty percent are required to use the remaining budget by the end of the first quarter of 2004. All technology sectors suffered a decline on the GTDI, and the IT services segment saw the biggest decline, dropping to 79 in November. Hankin says that other factors besides decreased demand have led to lower spending in the IT services sector. "We believe that much of the shortfall is the result of competitive pricing among vendors, and new outsourcing and hosted model options that have put considerable pressure on domestic service providers in North America," he says. The Gartner Technology Demand Index is an offering within Gartner IT Watch. Gartner IT Watch uses results from weekly polling of 25,000 IT decision-makers to produce an early indicator of IT spending trends for investment professionals and vendors. Gartner IT Watch captures short- and long-term attitudes toward investment in IT products and services, and reflects anticipated changes in spending trends because of current events and broader economic factors.