Gartner Survey Shows 56 Percent of Organizations Are Increasing Their IT Budgets in 2001

Business Wire, July 17, 2001

Business/Technology Editors

STAMFORD, Conn.--(BUSINESS WIRE)--July 17, 2001

Despite layoffs and cutbacks among numerous IT vendors, many organizations are increasing their IT budgets in 2001, according to a new survey by Gartner, Inc. (NYSE: IT and ITB).

The survey showed that 56 percent of respondents plan to spend more on IT in 2001 than they did in 2000.

Gartner surveyed 589 organizations worldwide between March and June of this year. The average enterprise in revenue was $2.3 billion. The average number of employees for these companies was 8,100, with an average IT workforce size of 286.

"While many IT vendors are having a difficult time right now, it's important to point out that this does not necessarily translate into trouble for the organization's IT spending budget," said Barbara Gomolski, research director for Gartner. "Though companies have cut back on their hardware purchases, they continue to spend on services and personnel."

Gartner examined IT spending budgets by industry, and it found the economic climate has not deterred the "Type A" or leading-edge adopter industries from increasing their budgets as a percentage of revenue. Government, which some consider "Type A" because of e-government initiatives, shows an increase of 18 percent between 2000 and 2002, followed by telecommunications services, which is expected to increase IS budgets as a percentage of revenue by 13.9 percent.

Not all sectors are increasing IT spending. The utilities segment is expected to reduce IT budget as a percentage of revenue by 15 percent between 2000 and 2002. During this same period, the construction segment appears to contract, as its IT budget as a percentage of revenue decreases 13.5 percent.

IT capital budgets -- which include hardware purchases -- have been impacted more severely than operating budgets because of economic issues. The utilities sector is projected to experience a 27.5 percent decrease in IT capital budget as a percentage of revenue between 2000 and 2002. The petroleum segment is expected to decrease 25.8 percent. The health services segment seems unaffected by the economy, with survey respondents showing a 27.6 percent increase in capital budget between 2000 and 2002. Banks are actually projected to increase capital budgets by 10.8 percent during the two-year period.

"While it's clear that IT budgets have not been slashed as a result of the economy, it's also evident that enterprises have shifted where they spend their dollars," Gomolski said. "Discretionary spending -- which includes expenses surrounding re-engineering and consulting -- is now a smaller piece of the budget. Baseline -- or nondiscretionary expenses -- now consume a larger percentage of the IT budget."

Additional findings from the survey showed that respondents said spending on internal staff consumes the biggest chunk of the IS budget at 32.6 percent. Respondents also indicated that 81 percent of their IT staff are internal staff (employees), while 19 percent are external staff (contractors, consultants or outsourcers). On average, 5.5 percent of the organization's employees are IT professionals. After personnel costs, survey respondents spend the most on hardware (20.4 percent), software (17 percent), external services providers (14 percent), data and voice communications (12.8 percent), and facilities and other charges (3.1 percent).

Additional information is available in the Gartner Research Note "IT Spending Survey Shows Steady Growth in IT Budgets." This Research Note explores the high-level results from the upcoming Gartner 2001 IT Spending and Staffing Survey report.

Additional information on IT spending is available to subscribers of Gartner's programs. To subscribe to these services, please call 408-468-8000. Additional analysis on this market is also available at www.gartner.com.

Gartner analysts will provide further analysis on the outlook for IT during the Gartner Symposium/ITxpo 2001, October 8-12 in Orlando, Florida. Attendees will be able to choose from more than 250 in-depth, analyst-led sessions that explore IT inside and out. Gartner analysts will show how companies can align and manage their IT strategies and investments for bottom line advantage. More information on Gartner Symposium/ITxpo 2001 is available on the Gartner Web site at http://www.gartner.com/symposium/us.> Gartner, Inc. is a research and advisory firm that helps more than 10,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner, Inc. is headquartered in Stamford, Connecticut, and consists of 4,600 associates, including 1,400 research analysts and consultants, in more than 80 locations worldwide. The company achieved fiscal 2000 revenue of $859 million. For more information, visit www.gartner.com.