Firms will spend 2.3 percent more on IT in 2002 than in 2001, and 82 percent of these firms will at least retain their current budgets over the second half of the year, according to Forrester Research (Nasdaq: FORR). Forrester’s semiannual Business Technographics North America Benchmark Study examines the state of North American companies’ IT budgets, purchase plans, and control of IT processes.

“Although IT budgets have stopped bleeding, it’s still a harsh buyer’s market for tech vendors,” said Tom Pohlmann, senior analyst at Forrester. “In areas like IT outsourcing and enterprise apps, a vendor’s best hope is to squeeze incremental business out of its installed base of customers.”

In Forrester’s previous Business Technographics Benchmark Study — the Business Technographics February 2002 North America Benchmark Study — Forrester found that IT and business execs were risk-averse and shifted their IT strategies toward infrastructure and do-it-yourself development and integration work. Key findings from the August 2002 report reveal new trends and a cautiously optimistic outlook on IT spending during the second half of the year.

  • On average, IT spending in 2002 is 2.3 percent higher than 2001. IT spending in consumer services and retail will grow by more than 7 percent, while high-tech firms and utilities lead the decliners.
  • Nineteen percent of the companies surveyed will raise IT budgets over the second half of 2002 — only 12 percent will cut them. Of those raising budgets, 37 percent will raise them by more than 10 percent.
  • C-level sentiments are on the mend. Fifty-five percent of respondents describe their executives as willing to “spend what it takes” on IT. As a point of reference, only 36 percent felt that way at the beginning of the year.
  • More companies have centralized IT management. Fifty-eight percent of Global 3,500 companies (firms with annual revenues of $1 billion or more) characterize their IT organizations as heavily centralized, compared with only 17 percent of Global 3,500 companies at the beginning of 2001.
  • The midmarket isn’t a growth opportunity for vendors. While midmarket firms (firms with annual revenues less than $1 billion) are more likely to increase budgets, they’re also less likely to buy any of the technologies covered in the report, with the exception of ERP software.

Technologies and services covered in the Business Technographics August 2002 North America Benchmark Study include:

  • Server hardware, network hardware, storage hardware
  • IT consulting services, IT outsourcing services
  • CRM software, ERP software, content management software, business intelligence software
  • Web services technology
  • Enterprise portal products
  • EAI technology
  • Internet connectivity

“Executive commitment to IT is returning, and interest in categories like IT consulting and storage are showing more life,” adds Pohlmann. “But vendors must know where to look. Specialized, smaller-scale offerings will carry the services market, while data dissemination products like portals and business intelligence apps carry the software market.”

How To Use Business Technographics North America Benchmark Studies
Forrester’s study can help corporate IT and eBusiness executives benchmark their spending, purchase plans, and organizational behaviors against industry peers. Technology vendors can also assess their strengths and weaknesses relative to the competition, uncover vertical market opportunities for their products, and profile prospective buyers.

Later this month, Forrester will be publishing a series of Tech Spending Profiles based on panel data from Forrester’s August 2002 North America Benchmark Study. The new research product is available semiannually (in January and June), following the release of each Benchmark Study. Each Tech Spending Profile comes with a tool that enables technology executives to benchmark their IT spending and planning efforts against a peer group of companies. Technology vendors will find this product useful as they finalize marketing and sales planning for 2003.

The Forrester Tech Spending Profiles will include analysis and data on spending, budgets, and rollout plans, as well as a qualitative overview of general attitudes and behavior specific to 10 unique industry groups. They include:

  • Business services
  • Chemicals and petroleum
  • Consumer services
  • Distribution
  • Financial services
  • Finished goods manufacturing
  • High-tech
  • Insurance
  • Retail
  • Utilities

For Forrester’s Business Technographics August 2002 North America Benchmark Survey, Forrester surveyed 1,001 senior business and technology decision-makers at North American companies with annual revenues of $500 million or more.