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Survey: IT budgets still in flux

Information technology budgets continue to fluctuate, with many being cut in the last three months, according to a survey released Wednesday by Goldman Sachs and Gartner.

Information technology budgets remain in flux, with many being cut in the last three months, according to a survey released Wednesday by Goldman Sachs and Gartner.

The survey of 369 attendees at Gartner Symposium/ITxpo earlier this month found that 60 percent had their IT budgets "adjusted" with decreases being the norm. And IT budgets appear to be undergoing further tweaking. Less than half of the respondents (46 percent) said they expected their IT budgets to remain flat for the rest of the year with the remainder split between increases and decreases.

The study did hint that there could be a slight spending increase toward the end of the year, as companies try to burn up their budgets. Not all tech markets are expected to be hit as hard: Goldman Sachs is predicting that security, storage and Web services providers should see some increase in spending from customers.

"I think people have been intentionally underspending, and they'll make it up at the end of the year. I think we'll still see a 1.5 percent increase in spending (over last year)," said Al Case, senior vice president at Gartner. "We'll start to see some equipment upgrades and replacements, and certainly a lot of that spending in storage and a lot of wireless initiatives."

Companies aren't changing their IT spending plans even though many respondents said the economy is likely to improve by the end of the year. While 89 percent of the respondents in the Gartner/Goldman Sachs study said they think the world economy will see a modest recovery by the end of the year, 79 percent said they won't change their spending plans.

The report echoes similar predictions from research firms saying that IT spending would stay stuck in the mud this year. Forrester Research recently predicted that companies would spend an average 3 percent of their revenues on e-business technology in 2002, compared with 3.5 percent last year.

A Merrill Lynch survey of more than 100 American and European chief information officers found 56 percent saying that "meaningful improvement" in IT spending would not happen until 2003.

In the areas where companies are planning on spending money, tech brands such as BEA Systems, Microsoft, Dell Computer, Compaq Computer-- now a part of Hewlett-Packard--and Cisco Systems are expected to benefit, Goldman Sachs analyst Rick Sherlund said in a research report.

The study also found that two-thirds of respondents plan to begin working with Web services, which link servers over the Internet and allow data to be exchanged more easily, in the next two years. Slightly over half of the respondents said they would use Java-based technology, while 31 percent said they planned to use Microsoft's .Net technology.

On the hardware front, IT managers said they are putting off purchases of desktop PCs, choosing to buy laptops and handheld computers instead. Most companies expect at least 256MB memory configurations by the end of the year, said Sherlund.

Prices are also likely to come down as companies compete, according to the survey. Fifty percent of the tech buyers surveyed said they had more "pricing leverage" with 46 percent saying their ability to demand better prices remained unchanged.

One area that showed surprisingly strong interest was voice over IP, Case said. The study found that 15 percent of respondents were already working on programs this year, while 39 percent were developing projects or evaluating vendors.

"That was probably the biggest surprise in terms of a new technology catching hold," Case said.