Tech Buyers Still Cautious, Despite Economic Omens

Positive economic data abounds, but business-technology buyers remain cautious, a market research firm said Tuesday.

A poll of IT buyers in public and private organizations found that less money was spent in November than in October, Gartner said. The spending drop was reflected in the Gartner Technology Demand Index, which declined to 81 from 85. A value of 100 means organizations spent exactly what was budgeted for the month.

"(The decline) was more of a concern for the direction, than its actual size," Gartner analyst David Hankin said. "It indicates to us that a broad-based recovery in 2004 may not be in place."

Indeed, Gartner found that spending on IT services suffered the biggest decline in the month, while hardware purchases remained steady. Services spending may have declined because of the usual end-of-year renegotiations of multiyear service contracts, Hankin said.

Spending, in general, has been affected by organizations preferring to conserve cash and demanding higher returns on purchases. Prices for technology also are dropping, despite the addition of better features.

"After the steam went out of the market (in 2000), the predominant trend has been conservative spending and a need (for buyers) to justify the value of what's being purchased," Hankin said.

In addition, some organizations are holding back on major purchases while new technology concepts, such as Web services and utility computing, evolve. Products supporting what proponents claim is the next generation of computing aren't expected to really buy in the short term.

Forty-nine percent of respondents said their fiscal year ends in December, and 67% of those said they would lose any budget money not spent by the end of the year. Only 30% said they would carry unspent funds into next year.

Of all the organizations that said they would roll over uncommitted funds, 61% said their policy permits them to spend 2003 budget dollars anytime during the next fiscal year.

Conservative spending among organizations is a reflection of the consensus that CIOs have more to gain by spending less on technology than by spending more.

Said Hankin, "The trend over the last couple of years is more in line with demonstrating that they are getting good value for expenditures and really being good guardians of their enterprises' assets."