Merrill forecasts IT spending growth in 2002
Published: 02 Jan 2002 16:05 GMT
Corporate spending on technology is expected to inch ahead 3 percent in 2002, Merrill Lynch said, as companies refocus their priorities amid ever-tightening budgets and a heightened emphasis on security.
Technology spending will continue to be shaped by the effects of 11 September and will be limited to a more select cadre of vendors this year, according to Merrill's survey of 75 chief information officers in the United States and 35 in Europe.
The projected 3 percent growth target for 2002 is an improvement over 2001's 1 percent decline in IT spending, but it is still only an initial forecast. At the outset of 2001, Merrill's survey indicated that chief information officers expected IT spending to grow 9 percent for the year.
"We can't recall a year that changed so dramatically," Merrill Lynch analyst Steven Milunovich said in a report on the survey Wednesday. Most chief information officers revised their budgets at least twice in 2001, and the deepest spending cuts were made in staffing, consulting and hardware, Merrill said.
The effects of 11 September, which caused chief information officers to be much more pessimistic about spending, will continue to reverberate in 2002, according to the survey. Security ranked as the top priority for 2002, and disaster recovery ranked third.
"Re-prioritisation post 9/11 might crowd out some mainstream spending," Milunovich said. Other top spending priorities for 2002 include ERP (enterprise resource management), Web development, Windows 2000 and storage. A Morgan Stanley survey in December showed similar results.
Other trends expected to continue in 2002 is the contrast between US and European IT budgets; Europeans were much more optimistic, expecting 4 percent growth, whereas US IT managers expect just 2 percent growth.
Chief information officersalso indicated they are becoming more choosy about who they purchase their technology from; IBM, Microsoft, Dell Computer and Cisco Systems are all expected to fare well in 2002, while EMC, BEA Systems, Computer Associates, Brocade and Siebel are expected to be weaker. "Users migrate to big safe vendors in times of uncertainty," Milunovitch said.
Budgets will also continue to be determined more by chief executives and chief financial officers than chief information officers. Fifty-two percent of chief information officers said they expected management to keep a tight leash on spending.
While chief information officers continue to be conservative about 2002, forecasts for 2003 were optimistic. European chief information officers expect their budget to grow 12.1 percent in 2003 and their US counterparts expect growth of 6.8 percent.
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