IT Budget Growth Will Slow As E-Commerce Initiative Spending Soars, SG Cowen-Datamation Survey Says - Industry Trend or Event

EDP Weekly's IT Monitor, May 15, 2000

North American companies' growth in spending on Information Technology (IT) will slow to 10.7 percent this year from 12.9 percent in 1999, according to the 23rd annual SG Cowen-Datamation 2000 Computer Systems User Survey of 300 corporate technology buyers across North America. Yet corporate spending on e-commerce initiatives will surge both this year and next.

The slowdown in IT budget growth reflects waning outlays on Y2K matters and a maturing client-server market, according to Drew Brosseau, Boston-based SG Cowen senior software analyst.

"With Y2K concerns behind them, companies plan to rev up their e-commerce initiatives," Brosseau explained. "Spending on e-commerce projects will rise more than 35 percent this year, the SG Cowen-Datamation survey shows. Corporate spending on e-commerce initiatives will rise by 25 percent in 2001."

In fact, survey respondents cited e-commerce software applications - more than any other type - as their investment focus for 2000, according to the survey.

"E-commerce applications are booming across-the-board," Brosseau noted. "Fully 60 percent of respondents expect to start or expand an application this year, while only nine percent claim to have completed their e-commerce work. That suggests still-low e-commerce penetration - and strong spending through next year at least," he added.

Overall, e-commerce spending will account for close to 20 percent of companies' IT budgets this year, the SG Cowen-Datamation survey says. Remarkably, smaller organizations - those with less than $250 million in annual revenue - will spend a slightly larger percentage of their budgets on e-commerce plans than will their counterparts with revenues of more than $250 million per year.

The healthy corporate e-commerce spending plans for 2000 mean good news for manufacturers of information storage systems, the SG Cowen-Datamation survey says.

Thirty four percent of those firms starting to implement e-commerce plans say they "need more" disk storage capacity. Meanwhile, 28 percent of such firms say they need more storage for departmental systems. Those numbers are higher than the figures for all companies in the survey.

"It's a bullish picture for the e-commerce software and storage systems makers," Brosseau observed.