Good Enough Attitude Will Limit IT Spending Growth

IT spending is rebounding, according to surveys recently completed by research firm IDC, but even as the economic recovery feeds more revenue into business coffers, caution remains the watchword among those with their hands on the purse strings.

This battle over spending between IT and financial officers will continue for the next 18 to 24 months, says Stephen Minton, an analyst with IDC and the author of several reports based on surveys of nearly 600 IT managers.

"The bottom line is there is a gradual recovery in IT spending," Minton says. "It's still pretty anemic growth compared to before the economic downturn, but it's a definite uptick from the IT recession."

Most of the slowly increasing spending is being aimed at improving basic IT infrastructure--PCs and servers first, storage, network equipment, and network-system software second--that has languished over the past two years and needs updating. "There's so much that need to be upgraded," says Minton, "and today's spending is primarily catching up with the infrastructure's pent-up demand."

Among the problems that IT managers have in convincing CEOs, CFOs, and department heads to let loose money budgeted for technology is what Minton characterizes as the "good-enough computing" mood that permeates many companies. According to the IDC survey, this "good-enough" psychology is the third-biggest drag on IT spending.

"This good-enough idea has really penetrated how business leaders think about IT," Minton says. "'We spent so much on IT, do we really need all this stuff?' is their thinking." Those with control over IT budgets remain "very skeptical," Minton says, of boosting spending, fueled at least in part by discussions about whether technology really contributes to the company bottom line--and, if it does, what the real return actually is.

However, CIOs and IT managers have no patience with that attitude, Minton says. "They have a big challenge in convincing the powers-that-be to release money. But they're banging on the doors to spend more, especially on infrastructure, where IT sees some urgency."

According to the IDC survey, nearly a third of the IT managers polled said that their organizations had spent less than 90% of the allocated IT budget in the past 12 months.

Minton expects that the tug of war over budgets will work itself out. "It will take a bit of time for this fight to clear out," he says. "In 18 to 24 months, the pattern will swing towards more IT spending." It will take that long, he says, to convince the money managers that the economic recovery is sustainable. "That's why the boost in spending is going to be so gradual."

IDC estimates that although 2003 will see only a tepid increase in IT spending at best, there are signs that momentum will build into 2004. Within the next couple of years, says Minton, IT spending growth should reach the 6% to 7% level. That's a far cry from the sustained double-digit growth in spending before the downswing. And a return to such lofty numbers will be difficult, requiring something that's still off IT radar screens.

"Never say never," he says, when asked if spending will ever reach double-digit growth again, "but there's nothing at the moment to propel IT to grow two or three times faster than the general economy."