Spending is a flat affair in 2003

IT executives are painting a sombre picture for growth in IT spending this year, remaining cautious about investing because of a weak business climate which has forced enterprises to adjust their plans in favour of routine infrastructure reviews and projects.

Expectations for IT spending this year have dropped below even the timid forecast issued in late 2002, according to a Goldman Sachs Group survey undertaken in mid-February.

Even more concerning is that respondents' definitions of what their annual IT spending growth will be under normal circumstances in the long term dropped to an all-time low.

The poll of 51 CIOs, 27 IT directors and 15 IT vice presidents from the world's largest 1000 companies expect an average increase in IT spending of 1 per cent in 2003, down from an average expectation of between 2 and 3 per cent in late 2002, Goldman Sachs said.

For IS managers like Troy Green of Marrickville Council in Sydney, the annual IT budget (around $2 million) will grow by only 2 to 3 per cent to keep pace with inflation and maintain current levels of service and support. Budgeting conservatively will also ensure that IT equipment reaching its three-year mark can be swapped out, according to Green.

In 2003, Marrickville Council's capital IT budget will be used to fund new projects and ventures centred on post-implementation reviews and customising current systems to ensure that all IT resources are being used to their full potential, Green said.

"Gone are the days when a purchase [is made] because an application or tool is the new fad," he said.

Before the council makes any new IT investments, project owners must be able to demonstrate a clear ROI in terms of money spent and services delivered to citizens, Green said. And new projects or systems must also be Web-enabled and secure.

David Falvey, a solutions architect for Sydney-based business solutions consultancy Resonate, agreed with those expectations in terms of his own organisation's spending plans. "I'm expecting this year to be much the same for us with 1 or 2 per cent IT spending growth." Most investment, he said, will be in testing business and customer analysis solutions as opposed to larger ticket items like hardware.

Another bleak survey finding is that about 48 of the respondents now expect an acceleration in their IT spending to come in 2004 or later, up from 43 respondents in the December survey, an indication that "spending recovery gets pushed out further beyond the near-term horizon", Goldman Sachs said.

Falvey suggested the main reason for flat IT spending this year was a "perceived failure rate of IT projects".

"People are now trying to deploy in a more departmental fashion. Companies are going back to a more silo approach," he said.

It's clear from Goldman Sachs' survey that an improvement in revenue growth is the most important factor in increasing IT spending.

-- with Juan Perez

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