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After 15 months of below-budget spending, IT spending now is in sync with budgets, report IT Watch respondents. Organizations are planning for a 9 percent increase in IT spending in 2005. Small enterprises are driving most of the budget growth.
The TDI reveals the following for October:
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Increased business confidence will drive a net 9 percent increase in external IT budgets for 2005, according to respondents in Gartner's IT Decision-Maker Panel. The fastest growing segment is expected to be networking and telecommunications with budgets slated to increase by 15 percent. External IT services budgets will increase by 9 percent, while hardware and software budgets are expected to grow by 6 percent and 7 percent, respectively.
Implication: After two years of malaise, information technology spending is heading for an upturn in North America in 2005. Notably, the optimism expressed by respondents grew stronger throughout the third quarter. We expect smaller gains in other regions of the world. Budget decision makers in small businesses (fewer than 100 employees) are the most optimistic and are fueling most of the reported budget increases. Although accounting for less than one-quarter of total external IT spending, we note that small organizations are a leading indicator of budgeting trends in larger entities given their relative agility.
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Industry segments with the highest reported external IT budget growth are financial services, communications, services and government. By contrast, healthcare services and manufacturing report budgets that are flat or declining.
Implication: Spending on regulatory compliance and security is driving the upturn in IT budgets in financial services enterprises and government entities of all sizes. Increased budgets in smaller communications and services firms are driving overall increases in those sectors. While health care delivery and manufacturing respondents report flat or decreasing external IT budgets in aggregate, smaller firms in those sectors plan double-digit IT budget increases. By contrast, the largest healthcare and manufacturing firms report that IT budgets will decline by 10 percent and 7 percent, respectively.
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The current Technology Demand Index (TDI) increases to 101 for the third quarter. This is up from the index of 80 for the second quarter which was the all-time low since the inception of IT Watch in March 2003.
Implication: Enterprise spending on IT lagged budgeted levels throughout 2004 - until the third quarter. Now two-thirds of respondents report that their external IT spending is at budgeted levels. We regard these results as a powerful indicator of a return of business confidence. This is not to imply that unbudgeted spending is being authorized, however. Caution remains the norm for IT investment and expense.
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To measure the demand, Gartner surveys over 75 CIOs and key decision-makers every week about their IT spending. Then Gartner analyzes data and determines if IT spending is more or less than anticipated for the current fiscal quarter.
The Technology Demand Index is based on 100. So, a score of 103 means increased IT demand of 3%. A score of 96 means decreased IT demand of 4%. The greater the score, the greater the demand. The lower the score, the lesser the demand. It's that simple.
The Technology Demand Index is just one of the valuable services from IT Watch.
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The Gartner Technology Demand Index is part of IT Watch — a subscription service that tracks and analyzes the market demand for IT products and services.
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