IT Spend in 2004

An overall increase in IT investment of 5.3% across Europe and the US is forecast in 2004, according to NOP World's annual Technology Confidence Barometer.

The results of the survey, conducted with over 1500 IT decision makers in the US, UK, France and Germany, show signs of encouragement for technology vendors, although the heady days of the 1990s, when double digit growth in IT budgets was the norm, are certainly a thing of the past.

The picture is brighter in the US, where a rise of 6% in IT spend is forecast, compared to only 4.4% in Europe. However, this European figure varies between countries, with Germany more optimistic at 5.8%, compared to only 2.6% in France, and the UK holding the middle ground at 4.7%.

Compared to the last wave of the survey, conducted in December 2002, there is little indication of an upturn in the market. NOP World's forecast for 2003 was for IT budget rises of 5.9% in the US and 6.8% in Europe. The reduction in planned IT spend in Europe is based on caution demonstrated in both France and the UK.

Richard Jameson, Managing Director of NOP World Technology comments, 'With recent macro-economic data in the US all heading in the right direction, corporate investment in technology appears to be holding up well. In Europe, however, the investment picture remains patchy with only German organisations planning a noticeable increase in their IT budgets after several years of tight cost control'.

Part of the reason for muted spend in Europe is that there is still caution amongst large corporations. Companies with annual sales revenues greater than $750m are predicting growth in IT budgets of around 4% for next year. This compares to higher percentage (but lower value) increases in small and medium sized organisations.

But there is some encouragement from the public sector for beleaguered technology vendors. Government organisations predict a rise of 6.7% in their IT budget in 2004, compared to just a 3% rise predicted from the manufacturing sector.

Another ray of hope is that CIOs, CEOs and other senior business respondents predict growth rates of over 8% for IT spend, compared to the more cautious prediction of 4% growth made by IT managers. This may indicate that senior executives have not yet communicated planned increases in IT spend to those further down the decision-making chain.

Growth will be seen in all the key IT spend categories of software, hardware, networking and services. Security software is the biggest riser of the 15 specialist product and service categories the study covers, with growth forecast at 7% in 2004. Web-based applications (up 6.3%), Broadband (up 5.6%), Spam-filtering software (up 5.3%) and Storage (up 5%) are the other categories where the highest growth in spend is forecast for 2004.

Given this picture of steady but unspectacular growth in IT budgets in the forthcoming 12 months, it comes as no surprise that the biggest IT priority for survey participants is to reduce costs, mentioned by 31%. This was also the top priority for 2003. Security is also a growing area of concern, as noted above, with 23% mentioning it as the biggest priority for 2004 - significantly up on the 2003 figure. Systems upgrades (24%), hardware upgrade (23%), and improving business continuity planning (20%) are the next priorities mentioned. Security is also forecast to be one of the main growth areas in the longer term.

According to Richard Jameson 'The focus of businesses in Europe and North America remains firmly on tactical, day-to-day issues. IT vendors will be required to prove the security and bottom-line benefit of their solutions. Big-ticket investment in emerging technologies looks likely to remain a hard sell for the foreseeable future'.

New data, included in the survey for the first time this year, shows which IT suppliers can expect to see their share of companies' IT budgets increase. This is good news for major brands such as Microsoft, HP, Dell and IBM, who are showing clear momentum in uncertain times.

The NOP World Technology Barometer survey was conducted online between September and November 2003, amongst over 1500 IT decision makers in the US, UK, France and Germany in all sizes of company. As well as covering IT managers and CIOs, NOP World also interviews other line-of-business decision makers who influence IT spend, to generate an accurate forecast based on the views of all who have an input on IT spending decisions. The decision makers profiled are responsible for a majority of their organisation's spend on IT. The survey also covers other topics in more depth, such as open source/Linux and work-life balance, as well as providing key spending data on 15 specialist product and service categories. The data is weighted by country, market sector and IT spend by employee to ensure a representative forecast of the market. Unweighted sample sizes for this wave - US: 1076; UK: 233; France: 129; Germany: 113.

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

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