IT spending boost likely from Q3

IT spending is set to rebound in Australia and Asia with modest recovery in the second half of 2002, according to the latest research from Gartner.

The rebound will begin with financial services in the second half of the year and will be quickly followed by the IT industry.

Bob Hayward, Asia-Pacific senior vice president for Gartner research, said IT spending will improve by the end of the third quarter as market forces drive globalisation, external service provider model maturation and an increasing client focus on technology optimisation and business value.

However, the shaky start to 2002 will make the recovery a moderate, cautious one.

Hayward said the recovery will be moderated by continued fear, uncertainty and doubt among IT decision makers who have been delaying major investments.

The research supports a rapid uptake of wireless applications by enterprises in Australia and Asia through to 2005, which will initially be driven by Wireless Local Area Network (WLAN) technology.

IT services continue to buck the trend maintaining growth in the region with outsourcing driving this trend.

Gartner's Asia-Pacific IT services market chief analyst Rolf Jester said outsourcing expenditure has actually grown.

"While users have been cutting back on many IT projects, to the detriment of the consulting, development and integration services sectors, outsourcing is not typically a discretionary item. What we term IT management services is typically about maintaining essential IT and business operations and processes. This has in fact grown," Jester said.

He said there are two reasons enterprises favour outsourcing expenditure over other costs during uncertain economic times.

"Outsourcing is an expense item rather than a balance-sheet item. Capital equipment purchases may be curtailed, but if essential operational assets can be used and paid for via recurring expenses, then that is an advantage in uncertain times, and less risky," Jester said.

"Secondly, enterprises prefer the use of external resources over the recruitment of permanent staff during tough times."

CRM (customer relationship management) projects will also return along with business confidence and Gartner predicts 2002 will see enterprises consider CRM critical to corporate strategy.

However, Gartner's Asia-Pacific business applications research director Kristian Steenstrup said there will be a retreat from enterprise-wide initiatives due to disillusionment over a lack of credible results.

Pragmatism, he said, will be at a premium.

A continued drive to lower service costs while delivering higher levels of customer care will drive investments in e-service and self-service.

Storage up, pricing down

Business growth is also driving the storage market with hardware pricing dropping between 30 and 40 per cent per annum.

However, Gartner's Asia-Pacific research and advisory service principal analyst, Matthew Boon said the good news for vendors is that storage growth in most organisations is growing faster than the erosion in price.

Capacity in Asia-Pacific will grow from around 20,000 terabytes in 2000 to nearly 350,000 terabytes in 2005, a compound annual growth rate in excess of 75 per cent.

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