IT spending freeze to continue – Gartner

9 April 2002 Market research group Gartner today offered no respite for the beleaguered technology sector, forecasting a freeze in major technological innovation for at least another three years and extending its ‘gap year’ on IT spending for a further six months.

That was the gloomy message from the latest Gartner Symposium/ITxpo conference for users and vendors in Florence, Italy.

Any upturn in technology spending will lag significantly behind an improvement in the state of the overall economy, said Steve Prentice, vice president and director of research at Gartner. “CEOs will wait for the green shoots of recovery before undertaking any major growth in spending,” he told the conference.

Gartner’s so-called ‘gap year’ for 2002 – representing stalled growth in overall IT spending – will now last until at least mid-2003. The gap year will therefore now last for at least 18 months. However, organisations will continue to invest in integrating their business and IT processes.

“Businesses need to exploit the ‘gap year’ by being more tactical than strategic, implementing measures that will plug wastage of spend and accurately measure return on investment,” said Peter Sondergaard, Gartner’s group vice president and head of research.

The drop in IT spending in Europe is most significant in the UK, dragging down the European average. A separate Gartner survey shows the UK enduring a tougher time this year than in 2001, with the majority of respondents expecting to reduce IT budgets.

Elsewhere, most respondents in all other European countries said that they would be raising IT spending, with Italy leading the way with 45% saying they would increase IT spending and only 23% showing a decrease.

But of those users implementing new projects, Gartner warned that 70% will fail to reach the expected return on investment in the first year. Users were urged to be more vigorous than ever in implementing evaluation exercises and to be cautious about increasing hype exhorting them to quickly implement new technologies such as web services.

Prentice said web services was currently at the top of the so-called ‘hype cycle’ – but was on the way down. By 2004, web services would languish in a ‘trough of disillusionment’ on a par with that currently accommodating dot-com and wireless Internet projects, he said.

“The idea that web services is the technology that will magically cause a recovery in the next two years is simply not true,” said Prentice. “The real value of web services will become apparent once the technology matures, the vendors’ business model is robust enough and users have a clear understanding of the applicability. Right now, web services is a solution looking for a problem.”

However, if there is one technological area on which Gartner is pinning its faith, albeit in the longer term, is biotechnology. Strong interest among venture capitalists indicated that it could be a major source of next-generation technology innovation by 2010.

“Biotechnology is very important,” said Anne-Marie Roussel, Gartner’s vice president and research director for emerging technologies. “Why? Because this is where the investment community is looking right now.”

Gartner also identified a new buzzword – ‘bioinformatics’. Coined only recently by technology researchers in the UK, bioinformatics means the use of IT to enhance or accelerate biotechnology research.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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