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Study: IT spending back on track

Market researcher Gartner says 2004 began on a promising note for the information technology industry, with a "subtle" upward bounce in spending.

Don't break out the champagne just yet for the IT industry, but there's room for optimism, as businesses boosted their technology spending to begin the year.

For the first time since market researcher Gartner began publishing its monthly Technology Demand Index, IT spending among enterprises in the United States returned to budgeted levels in January. Spending had failed to keep pace with budgets since the index debuted in March 2003, the firm said.

Gartner said that actual spending in January was on par with budgets across all sectors--including hardware, software, networking and telecom, outsourced services and internal staffing--a marked contrast to results for the last quarter of 2003.

The index score was unexpectedly high for products such as tablet PCs (122), desktop PCs (TDI) and notebooks (110), the researcher said. Among external IT services, IT management and process management also turned in higher-than-expected scores of 110 and 113, respectively. An index value of 100 means that businesses spent exactly what they had budgeted for the month.

The trend seen in January is likely to linger. IT managers surveyed indicated that technology budgets will grow across the board through the year, with spending on software higher than in other segments. Within the software segment, the demand for application development/integration and security applications is poised to grow faster than for other categories.

"Stable current spending reported in January means that projected increases in 2004 budgets are beginning to flow through organizations," David Hankin, senior vice president and general manager at Gartner, said in a statement. "Still, the upward bounce is subtle. We have shifted from stall mode to controlled spending."

That sentiment matches a recent finding by IBM. A survey among 450 CEOs by Big Blue showed that the executives' priorities have shifted from cost cutting to new projects.

Gartner's monthly index was based on interviews with 600 IT decision makers in small, midsize and large organizations in both the public and private sectors. The company said higher spending in the year's beginning was not a result of the so-called January effect, because half of the managers who took part in the survey were from companies whose fiscal years do not coincide with the calendar year.