IT spending in 2004

Few of you are banking on IT budget increases in 2004. A study from Cutter Consortium shows that next year’s IT spending will be fairly flat to slightly declining.

“Even a slight increase in spending is welcome, but suppliers and IT managers might want to wait a bit before cheering an end to the technology slump,” says George Westerman, a senior consultant with Cutter Consortium.

Cutter surveyed 97 companies about planned IT spending using a measure called “IT intensity,” which is total IT expenditures divided by total organizational expenses. The goal is to put IT spending in context with inflation and growth in other corporate expenses.

As Westerman explains it, if IT spending grows just because of inflation or because the company grows, the IT intensity ratio will be remain constant. If IT intensity rises, this represents greater commitment to technology. If it falls, companies are investing elsewhere.

The survey predicts IT will represent 18.06% of total organizational expenses in 2004, down a tad from 18.29% in 2003, but not enough to be statistically significant. Here’s how respondents estimate their corporations’ IT intensity will change in 2004:

* Increase more than 50%: 1

* Increase 26% to 50%: 9

* Increase 11% to 25%: 14

* Increase 2% to 10%: 5

* Little change: 36

* Decrease 2% to 10%: 6

* Decrease 11% to 25%: 12

* Decrease 26% to 50%: 13

* Decrease more than 50%: 1

“In general, smaller organizations are much more likely to be increasing their IT intensity than are larger organizations. The largest organizations, which are most attractive to IT vendors, still plan on reducing IT spending relative to other expenditures,” Westerman says.

For more information about Cutter, go to www.cutter.com