Report: Tech Spending Recovering But Not Robust

Much to the consternation of the technology sector,tech spending has yet to turn the corner. But a new report from market analysis firm Aberdeen Group predicts worldwide tech spending will reach US$1.43 trillion by 2005, up from $1.21 billion in 2001.

According to Aberdeen senior vice president HughBishop, total IT purchases — including hardware,software and services — were flat worldwide in 2001 andslightly down in the United States, though 2002 will see a slight recovery.

“You’re not going to see it shoot up through thestratosphere,” Bishop told the E-Commerce Times.

He said he expects to see 3 to 4 percent growth in techspending in the United States during 2002, with most of thatgrowth coming in the second half of the year.

No High Tide

Though a recovery is on the horizon, tech spendingwill not return to the double-digit growth of the 1990s, according to Bishop.

“IT spending will no longer be a tide that lifts all boats,” he said,adding that with less money to spend, technologybuyers will have less room for error. Bishop expectstech spending will grow at a rate of 4 to 6percent through 2005.

The United States will be among the countries leading therecovery, according to Bishop. “The U.S. brought us intothis, so the U.S. will bring us out,” he said.

Bishop noted that France, the UK and Italy also will fare relativelywell, while China will see “huge” growth. On the downside, Japan will continue to have trouble through 2002.

Existing Infrastructure

In general, tech spending over the next 12 to 18months will focus on technologies and solutions toimprove, protect and maintain the products companiesalready have in place, Bishop said. He cited security,storage, enterprise applications and integrationtechnology as areas with strong potential for growth.

Customer service applications also will be popular.

“Companies are being a little more cautious. They wanta clear definition of the business advantage that thatsolution provides, and [they] want to be able to demonstratereturn on investment to senior management,” Bishop said.

Slow Spending

Tech spending is generally expected to be slow for therest of this year. Forrester Research has predicted a 14percent decline in tech spending during 2002, with a recoverybeginning in the second half of the year.

Moreover, Oracle CEO Larry Ellison toldreporters Tuesday that he sees no recovery for techspending in the next three months, and Dell executiveshave said they believe a slowrecovery will begin near the end of the year,months later than they previously had predicted.

Adding to the bad news, IBM on Tuesday toldinvestors that it will not meet earnings or revenueexpectations for the first quarter.

“The businessenvironment remains very tough. We saw a continuedslowdown in customer buying decisions in the firstquarter,” IBM chief financial officer John Joyce said.