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Gartner IT Spending and Staffing Survey Shows
Leading-Edge Technology Adopters
Will Likely Spend 11 Percent of Revenue on IT in 2000
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STAMFORD, Conn., July 31, 2000 — Gartner Group, Inc. (NYSE: IT and ITB) today announced that worldwide enterprises considered to be leading-edge adopters of technology spend an average of 11 percent of revenue on IT, which is an average of $17,500 per employee. Mainstream adopters of technology spend an average of 5 percent of revenue on IT, an average of $21,000 per employee. Conservative adopters of technology spend an average of 3 percent of revenue on IT, an average of $11,000 per employee.
In 2001, enterprises plan to allocate an average of 3.61 percent of revenue for IT budgets. That figure, coupled with 1.67 percent of revenue devoted to capital for IT, yields an IT spending index of 5.27 percent. That level of spending eclipses the 2.9 percent level reported from the 1998 Gartner survey. That dramatic change corroborates Gartner's analysis and forecast that by 2005, the typical North American enterprise will spend 10 percent of revenue on IT and the typical large European enterprise will spend 7.5 percent of revenue on IT.
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"If an enterprise is a conservative adopter of technology but its strategy is to become a mainstream adopter, it must increase IT spending by at least 160 percent," said Kurt Potter, a research director in Gartner's Business Management of IT group. "Furthermore, if an enterprise plans to move from being a mainstream adopter of technology to a leading-edge adopter, it will have to spend 220 percent more on IT," said Potter.
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The 2000 Gartner IT Spending and Staffing Survey canvassed 510 enterprises worldwide, with an enterprise average of $1.6 billion in revenue and 6,200 employees. The survey, which provides data on technology spending as a percentage of revenue for 78 industry subsegments, provides useful and powerful information for CEOs, CFOs, CIOs and other executives who must plan, manage and justify business plans enabled by IT.
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Corporate leaders view IT spending through the adoption profile framework to attain some predictability of where their IT spending level will be when they begin or finish enterprise transformation because of e-business.
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"Many corporate leaders are having a difficult time planning for IT spending because the business model that is supported by current IT spending levels will no longer exist in three years" says Potter.
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E-business spending is increasing. The survey results show that the typical enterprise will devote 16 percent of the IT budget to e-business. Gartner predicts that by 2005, 30 percent to 50 percent of the IT budget will devoted to e-business. Compared to other industries, IT industry vendors are devoting a higher percentage of their IT budgets to e-business, with 28 percent projected for 2001. Property and casualty insurance enterprises rank next with 23 percent, followed by pharmaceutical and retail enterprises, which show an average of 21 percent.
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Implementation and the ongoing costs associated with enterprise resource planning (ERP) are still a significant portion of the average IT budget. The survey results show that the typical enterprise will devote 17 percent of the IT budget to the ERP cost category in 2001.
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"In 1999, ERP consumed 22.4 percent of the IT budget but the figure is declining steadily. Funds previously earmarked for ERP are being redeployed to e-business initiatives, which are steadily increasing," said Potter.
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Because ERP fits well within the business processes of manufacturing enterprises, those enterprises are the high spenders with an average level of 28 percent of the IT budget, and discrete manufacturing shows a level of 32 percent of the IT budget in 2001. Process manufacturers show a level of 22 percent in 2001, but that is down from a high of 41 percent in 1999. Petroleum enterprises are also ranked high, with a level of 26 percent of IT budget in 2001.
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Prepackaged software vendors are investing heavily in preparation for application service provider offerings. In 2001, the average IT budget for those enterprises is projected to be 9.6 percent. With IT capital at 1.8 percent, the IT spending index for those enterprises is more than 11 percent. Telecommunications services providers are in the midst of an IT spending frenzy: the average IT budget for 2001, as a percentage of revenue, is 8.3 percent with IT capital at 15.8 percent. The average IT budget for securities brokers is projected to be 8.9 percent in 2001 with IT capital at 3.3 percent.
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About Gartner
Gartner provides unrivaled thought leadership for more than 10,000 organizations, helping clients to achieve their business objectives through the intelligent and efficient use of technology. Additionally, Gartner helps technology companies identify and maximize technology market opportunities. Gartner's technology content and strong brand reach IT professionals globally through Gartner Research, its research and advisory unit; Gartner Services, its custom consulting unit; Gartner Events, including Gartner's renowned Symposia; and http://www.gartner.com. Gartner subsidiary TechRepublic, Inc. (www.techrepublic.com)
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