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Companies on IT diet in 2002

Businesses plan to spend less on e-business technology this year and make the most of what they've got before they resume shopping, a new survey shows.

Businesses plan to spend less on e-business technology this year and make the most of what they've got before they resume shopping, according to a survey of 900 companies released Monday by Forrester Research.

Companies will spend an average 3 percent of their revenues on e-business technology in 2002, compared with 3.5 percent last year, the survey indicates. Forrester estimates the average e-business budget of the world's largest companies will reach $29 million this year, compared with $41 million in 2001. Forrester defines e-business technology as hardware and software used for facilitating communication and commerce among a company and its trading partners.

The number of survey participants that are considering purchasing server, network and storage hardware this year is 23 percent less than last year. Only 26 percent indicated that they'd consider buying new business applications for managing customer relationships, keeping track of inventory, and buying supplies online, compared with 58 percent last year. The number of companies considering further investment in IT consulting services this year fell 28 percent.

Analysts say many companies gorged themselves on new hardware, software and IT services in the 90s in anticipation of Y2K bugs and during the dot-com boom. Now these companies are concentrating on taking thorough advantage of the products they've amassed.

"These firms are much more focused on getting every last drop of value from their existing applications before upgrading to the next release," said Tom Pohlmann, a Forrester senior analyst. "These applications are quite time-consuming to set up, and many companies are still in the process of doing that."

Another survey released last month by Merrill Lynch also predicted more tepid technology acquisition plans among businesses this year. According to that survey of 100 American and European chief information officers, 56 percent said that "meaningful improvement" in IT spending would not happen until 2003.

Exercising greater restraint over IT spending doesn't necessarily correspond to a reduced interest in doing business online, however. The companies surveyed by Forrester expect the revenue they generate online to climb from 5.7 percent of revenue last year to 7.3 percent this year and 20 percent by 2006.

But without further technology investment, that kind of growth in online transactions may be wishful thinking.

"If companies are scaling back today, they can forget about that number; it's not going to happen," Pohlmann said.