IT spending to rise by 3% in 2002, says Merrill Lynch

3 January 2002 Corporate IT spending is expected to rise by an average of 3% in 2002, according to the results of a survey of chief information officers (CIOs) by investment bank Merrill Lynch.

The findings provide a glimmer of hope for the technology sector following an unexpected 1% decline in 2001.

Merrill polled a sample of 75 CIOs in the US and 35 in Europe. It found a marked difference in outlook between European and US companies. Whereas American CIOs expect to increase spending by 2%, in Europe the figure is 4%.

However, analysts warn that these figures are likely to be subject to change because many CIOs have predicated their budget increases on an economic recovery. For example, at the start of 2001 CIOs had budgeted for a spending increase of 9%. But during the year, most revised their estimates downwards at least twice as tough economic conditions were exacerbated by the events of 11 September.

The legacy of these attacks continues to affect CIOs’ outlook: Security and disaster recovery appear high on the list of spending priorities. Storage, web services and enterprise resource management are also expected to be areas of growth.

The terrorist attacks may also explain why US IT managers remain more pessimistic than their European counterparts. For 2002, US CIOs expect 2% growth in their budgets; Europeans expect 4%. In 2003, the figures rise substantially to 6.8% in the US and 12% in Europe.

Nevertheless, many vendors will continue to face pricing pressures, a trend that will favour the largest in their respective sectors, most notably Microsoft, Dell, Cisco and IBM. And, although CIOs criticised Microsoft for its licensing policy, 91% said that they would spend more with the software behemoth in the next twelve months, saying that the company represented a “necessary evil”.

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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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