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Gartner: IT spending could rebound modestly by '04

Gartner: IT spending could rebound modestly by '04

After two consecutive years of declines in IT spending, most enterprises will see a modest recovery in technology outlays by 2004, according to research released by Gartner

After two consecutive years of declines in IT spending, most enterprises will see a modest recovery in technology outlays by 2004, according to research released by Gartner Inc. at an IT Asset Management and Total Cost of Ownership Summit. "No industry will experience double-digit growth in IT spending through 2006 -- if ever again," said Barbara Gomolski, an analyst at the Stamford, Conn.-based research firm.

However, when looking at IT budgets as a percentage of corporate revenues, companies in process manufacturing, services and petroleum have seen increases in their 2003 IT budgets compared with last year, said Gomolski. Meanwhile, most organizations in the insurance, retail and IT industries saw their IT budgets shrink using the same benchmark.

For instance, IT budgets in the retail sector are down 4.2 percent this year, while tech spending among IT vendors is down a whopping 17.2 percent, according to Gartner.

Gartner, which based its figures on surveys it conducted with roughly 500 clients last October combined with some recent updates, estimates that the average company allots roughly 70 percent of its IT budget to "lights-on" or day-to-day operations such as data center activities and software licenses, said Gomolski. Of that, 32 percent goes to staff, 21 percent to hardware, 17 percent to software costs, 14 percent to external services, 14 percent to telecommunications and 2 percent to other costs.

Another 22 percent of IT budgets is typically set aside for capital spending, said Gomolski, with 35 percent of those investments going to hardware, 25 percent to software, 20 percent to networking and telecom, 14 percent to external services and 6 percent to other areas.

That leaves roughly 8 percent of IT spending that goes to "hidden" costs or business unit/IS-related expenses, said Gomolski.

On average, almost half, or 47 percent, of operating costs go to help desk and end-user support for mainframe, midrange, distributed computing, WAN and voice activities. Twenty-two percent of operating costs is steered toward administration and planning, 10 percent is earmarked for new development activities, 9 percent allotted for "major enhancements" and 11 percent goes to application support and maintenance.

The IT costs per employee range widely among industries. For example, employees in the securities industry, including brokers who use expensive high-end workstations with massive transaction processing volumes, come in at a hefty US$28,000 per worker. Meanwhile, support of workers in the energy utilities industry, which continues to deploy a large number of host-based systems, costs just $4,000 per person.

When it comes to the size of an IT workforce as a percentage of total employees, technology vendors led the pack, with 15.4 percent of total head count, followed by the securities industry, with 12.6 percent. Insurance companies also employ a high number of IT employees, with 11.9 percent of their workforce composed of technologists.

On the low end of the scale, IT workers at petroleum and health care companies make up just 4.9 percent and 4.3 percent of corporate employees, respectively, lagging federal and state government agencies, whose IT worker head counts are at 7 percent and 5.6 percent, respectively.

In the end, Gomolski told attendees, how much money companies spend on IT "is a lot less important than having good quality management" to ensure that the technology is deployed effectively. -- Computerworld (US online)

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