IT spending dropped in Q4 2002- can 2003 be that gloomy?
Yes it can
Goldman Sach's survey of major US Corporations' IT spend in Q4 2002 showed a surprising drop in Corporate IT spending. It surprised everyone, not least Goldman Sachs itself, writes Bob McDowall.
Leaving aside the fact that the lower IT spend will reflect flat or lower revenues for some of the major technology companies for 4th qtr 2002 / 1st qtr 2003, the IT market is now forecast to decline by 1% rather than grow by a modest 2.3%.
Psychologically, this is depressing for an industry where it was hoped that IT spending would end its decline in 2002 and stage very modest growth in 2003.
This is reinforced by the fact that these major US Corporations suggested that there were more likely to be budget cuts in IT spending in 2003 rather than modest budget increases. While in the longer term, the next three years, IT spending is forecast to increase by 5%, this is still very modest by 1990's standards.
Is it all down to economic conditions? Is the concept of Return on IT Investment, the concept that every dollar spent had better yield its like in return or the technology project in question, making its mark? Is the fear that an investment will not produce the desired result stopping firms from embracing technology? They all make a minor contribution. There is no pent-up demand for technology. More importantly there is no ground breaking technology coming onto the market which will have a major impact across the universe of technology users.
Very specific advances are being made in areas such as security and surveillance systems. Technology initiatives driven by development of industry business standards, legislation or insurance requirements have given a strong lease of life to matters like business continuity planning, monitoring and maintaining e-mail correspondence in sectors like financial services.
Any other growth is probably of a maintenance nature. Upgrading of PCs should theoretically provide a kick-start for the PC producers, good solid but low margin business. Perhaps, the IT industry is evolving into a solid, measured and relatively unexciting business?