IT Spending By Companies And Government Keeps Growing

Mar 25, 2003 (07:03 PM EST)

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IT spending by large companies and government agencies increased 3% last year, and that upward trend is expected to continue for the next few years, according to a report issued Wednesday by In-Stat/MDR. For the most part, the high-tech market-research and consulting firm says, the centralization of corporate information and resources should drive this market's spending on technology for the next several years, primarily in the form of increasing connectivity requirements, such as remote-access and VPN systems; continued investment in systems, particularly more mobile client devices; and expanded use of managed services.

"Regardless of the previous years' trends, enterprise IT spending will rebound slowly, but steadily, through 2006," says chief market strategist Kneko Burney. "There's still too much uncertainty in the worldwide economic environment. This, combined with these customers' changing requirements for mobility and need for improved information management and access, is expected to lead to cautious, hard-nosed IT investing in this market." These large companies will focus on investments with well-defined, 12- to 18-month returns on investment, Burney says--especially those investments that can improve the efficiency of their core business operations or the productivity of their workforces.

Burney compares the IT market to a roller-coaster ride. "For the time being," she says, "vendors targeting this market are encouraged to focus on solving the most essential, business-critical problems, like work mobility and access. In the medium- to long-term, these customers will begin to think more out of the box again in terms of IT planning, but are likely to continue to focus their resources on solutions that are modular in nature and address key business problems and/or enhance specific business processes."

Other findings by In-Stat/MDR:

• Large companies spent more than $225 billion on IT in 2002. By 2006, they'll spend nearly $256 billion on IT products, services, and personnel.

• In comparison with other business segments, the overall enterprise market remains, by far, the largest, in terms of IT spending. However, this market's IT spending is expected to experience the slowest growth over the next several years.

• Spending on telecom services and equipment is expected to experience the greatest growth moving forward.

• The services industry--including health-care, legal, accounting and management-consulting services--comprised the largest share of IT expenditures among U.S. businesses in 2002. Service firms should experience fast growth, largely because of above-average growth in the number of firms in this industry and increasing technology requirements. Manufacturers accounted for the second-largest share of U.S. IT expenditures.