No increase in IT spending until second-half of 2003


3 December 2002 Investment bank Goldman Sachs claims that there will be no increase in IT spending by US companies until the second-half of 2003 at the earliest. That is the conclusion of its latest CIO survey.

Companies will spend less than their allocated IT budget for 2002 and this trend will continue into next year, says Goldman. This means that the current downturn in the IT industry will continue for at least another six months.

“With increasing concern surrounding further macro-economic stagnation heading into 2003, the only thing that seems certain is that management will continue to keep tight clamps on IT spending,” concluded Goldman. The survey polled the views of 100 CIOs from among the 1,000 largest companies in the US.

Cost-cutting remains CIO’s top priority. While many were optimistic about the second half of 2002, they said that their IT budgets were “largely at the mercy of the economy”.

And when growth does return, it will be at a much lower level than during the technology and dot-com boom, according to Goldman. It predicts that IT budgets will grow by between 6% and 7%, compared to annual rates of up to 13% during the late 1990s.

Goldman’s overall IT spending forecast for 2003 is for growth of between 2% and 3%. This compares with figures for Europe from analyst group Gartner that forecasts growth in the European technology sector of 5.4% in 2003.

IDC is more bullish. It has forecast that revenues for the second and third quarters of 2003 will increase by as much as 14% compared to the same period in 2001.

Meanwhile, Goldman also highlighted the contrasting fortunes of the leading technology suppliers. Vendors increasing market share include software giant Microsoft, storage software specialist Veritas, systems giant IBM, application server software vendor BEA Systems and open-source software company Red Hat.

Those that appear to be losing market share include customer relationship management specialist Siebel Systems, database giant Oracle and Computer Associates, which is currently the target of a probe by the Securities and Exchange Commission into its accounting practices.

Goldman said that Red Hat, for example, had benefited from the steady increase in the adoption of Linux, for which it can charge maintenance and support fees, despite the software being available to users for free.

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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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