IT spending still being cut

A survey of some of the largest corporate IT buyers in the US has revealed a gloomier than expected outlook for IT spending in the second half of this year and well into 2004.

IT spending budgets are now expected to drop to minus 3.2 per cent in 2003, according to the latest quarterly survey of 100 IT decision makers by New York investment bank Goldman Sachs.

The figure is down from the bank's previous survey in February, which projected an expected growth of one per cent this year.

"Most IT buyers appear to be giving up on a second-half economic recovery and are tightening down the screws on tech spending even further," said Goldman Sachs analyst Rick Shurland.

Two thirds of the IT managers surveyed are not expecting a spending increase until 2004 or later. Those not anticipating an increase until after 2004 has almost doubled from 16 to 29 per cent since February.

The tighter than expected budgets surprised Goldman Sachs, which expected to see some stabilisation or even improvement in the outlook.

One bright spot in the survey suggested the possibility that some spending could not be held back any longer.

Almost one fifth of respondents plan to increase their IT capital spending by 10 per cent or more this year.

"A handful of our recent checks with major IT buyers have yielded signs of maintenance type capital spending improvements," explained Goldman Sachs analyst Laura Conigliaro.

That said, chief information officers interviewed by the bank indicated that market conditions have given them far more control to negotiate cheaper maintenance contracts.

Security continues to top the list of spending priorities. But interest in mobile connectivity, including wireless local area networks and laptops, is increasing.