If you’re planning on spending less on information technology (IT) this year, take heart; you have plenty of company.

An uncertain economy, fiscal austerity and lack of need are some of the reasons given for planned cutbacks, according to a survey of 900 high-level IT and business decision-makers at Global 3,500 firms (the largest 3,500 companies in the world with at least $1 billion in annual revenue). The survey, conducted by Forrester Research, shows that businesses plan to spend less on e-business technology this year and make the most of what they’ve got before they resume shopping.

“Most companies will curb the number and types of technology products that they will consider buying this year,” says Tom Pohlmann, senior analyst at Forrester. “Compared with 2001, companies are much more risk-averse when considering new technologies, opting to make do with what they have before buying more.”

Companies will spend an average of 3 percent of their revenues on e-business technology this year, compared with 3.5 percent last year, according to the survey. For survey purposes, Forrester defines e-business technology as hardware and software used for facilitating communication and commerce among a company and its trading partners. The Cambridge, Mass.-based Forrester estimates the average e-business budget of the world’s largest companies will reach $29 million this year, compared with $41 million in 2001.

The number of survey participants who are considering purchasing server, network and storage hardware this year is 23 percent less than last year. Only 26 percent indicated that they’d consider buying new business applications for managing customer relationships, keeping track of inventory and buying supplies online, compared with 58 percent last year. The number of companies considering further investment in IT consulting services fell 28 percent as well.

Analysts say many companies gorged themselves on new hardware, software and IT services in recent years in anticipation of Y2K bugs and during the dot-com boom. Now these companies are concentrating on taking thorough advantage of the products they’ve amassed.

“Companies are much more focused on getting every last drop of value from their existing applications before upgrading to the next release,” says Forrester’s Pohlmann. “These applications are quite time-consuming to set up and many companies are still in the process of doing that.”

Another survey by Merrill Lynch predicts more tepid technology acquisition plans among businesses this year. According to that survey of 100 American and European chief information officers, 56 percent said that “meaningful improvement” in IT spending would not happen until 2003.

Exercising greater restraint over IT spending doesn’t necessarily correspond to a reduced interest in doing business online, however. The companies surveyed by Forrester expect the revenue they generate online to climb from 5.7 percent of revenue to 7.3 percent this year and 20 percent by 2006.

Despite the economic downturn, companies still believe that technology will make a huge difference in driving business. The survey shows that companies estimate that in five years, online revenue will make up 20 percent of total corporate revenues.

That, however, may be wishful thinking. Pohlmann warns that without further technology investment, that kind of growth in online business is unlikely. “If companies are scaling back today, they can forget about that number; it’s not going to happen,” he says.

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POSTED ON: 8/1/2002