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Networks gobble IT budgets

Internet and intranet technologies are consuming more and more of corporate information technology budgets.

Information technology (IT) budgets and spending strategies are shifting as companies increasingly see corporate intranets and access to the Internet as critical resources.

A new study released today by Softbank Forums said Internet and intranet technologies are "fueling a buying revolution."

Surprisingly, the study reveals that the winners among hardware and software vendors won't be just be big players like Microsoft, Netscape Communications, IBM, Oracle, or Sun Microsystems.

Nearly half of the 150 companies interviewed said they will look beyond their traditional vendors to solve their intranet needs, giving start-ups an edge in competing for customers. However, the survey did not mention which new vendors were being considered by the companies interviewed.

"They are looking for cutting edge technology or vendors with a vision for the future ? a small company with red-hot technology," said Stan Schatt, director of research at Computer Intelligence. "There are areas of the Internet that are so new, such as push technology and Pointcast, but there are 25 other players as well. So companies are willing to step away from traditional vendors."

But the willingness to try something new does not carry over into all facets of the industry.

"These companies would not look at a new browser vendor, but there so many areas that are open, such as e-commerce and security systems, where no vendor holds 60 or 70 percent of the market," said Schatt. As the market continues expanding, smaller vendors have the opportunity to nudge into the market.

About one-third of the companies interviewed for the survey said their spending on Internet technology will increase by just over 30 percent. Thirty-four percent expect to increase spending on intranets by just over 30 percent, while 15 percent said they plan to at least double intranet spending.

"Companies see intranets as critical to their success, which has leveled the vendor playing field. Even small companies with superior products can compete if their products satisfy a compelling need," said Computer Intelligence senior research analyst Stan Schatt.

As budgets balloon, the costs associated with implementing a top-notch system aren't the highest priority for companies surveyed. Respondents said quality is No. 1 on the list of factors when considering whether to revamp IS systems with either a new vendor's products or a traditional vendor's wares. The least important factor noted was cost.

In fact, IS chiefs are planning to burn through plenty of money to get onto the Net. Nearly half, 49 percent, said they were thinking of scrapping their entire systems to build from the ground up to accommodate intranet technology. Seventeen percent said that their intranet and Internet budgets will each hit $1 million.

While half of the companies surveyed said they are reevaluating their entire information infrastructure, 83 percent said they plan to buy extra hardware and 79 percent plan to buy additional software.

Almost 70 percent are projecting increases in their intranet budgets, which is relevant because none of these companies are starting from ground zero. A spokeswoman for the study said 94 percent currently have email, 88 have a Web site, and 75 percent have an intranet already in place.

"(The transition) is a matter of competition and the budget becomes a secondary issue," added Schatt.

He explained that moving to a corporate intranet is a strategic decision. Companies want to be accessible to their customers and keep up with their competition. So, intranet development is seen as mission critical. Orders to get it implemented are coming from top executives and the budget isn't as critical an issue.

Neither is reliance on proven, time-tested technology, apparently. Eighty percent of companies surveyed said they plan to use Java in the next 12 months, despite the fact that the technology is still relatively immature. That number includes companies who have already made a financial commitment or are planning on investing in Java, a spokeswoman said. Forty-three said they were interested in implementing ActiveX products. The spokeswoman added that the survey did not ask the companies to pick Java or ActiveX exclusively.

The companies interviewed come from an array of industries including services, wholesale-retail, manufacturing, health care, education, agriculture, transportation-utilities, and government. All have 1,000 employees or more.

Other research firms have predicted a big uptick in intranet and Internet spending. CAP Ventures, a consulting firm that specializes in document management, released a report in January that said spending on corporate intranets would double this year to $8.45 billion. The study also predicts software and service revenue would grow faster than hardware sales.

CAP projected 50-percent annual growth through the year 2000. While hardware and system software topped spending in 1996, CAP expects application development, services, and training to grow faster this year.

Also, Zona Research tagged the market at $6.03 billion in 1996, and expects a jump to $12.1 billion in 1998.