Massive IT turnaround expected soon: Gartner

by CXOtoday Staff    Oct 21, 2003

Technology spending is all set to return to sizeable growth in 2004, as companies shift from cost-cutting and focus on innovations that drives sales, says Gartner.

At its annual conference this week, Gartner Inc. is advising its client base of 10,000 corporate and government clients to invest more in 2004 on wireless networks, Web services and technologies that help businesses grow, not just save costs.

“Gartner is telling you that a big turnaround is coming soon,” Michael Fleisher, the consulting company¨s chairman and chief executive, said in a speech to some 6,000 corporate technology purchasing decision makers attending the Gartner Symposium conference in Orlando, Florida.

“2004 will be the year that companies make the turn from protecting profitability, to driving growth,” Fleisher said. New technology changes will be the order of the day, as spending accelerates modestly in 2005 and 2006, he added.

“We believe that 2006 will look as different when compared with 2003, as 2003 looks when compared with 1999,” Fleisher said, referring to what he sees as a dynamic change brewing.

The consulting firm estimates that 25 percent of all technology jobs will be centered in low-cost, developing-world countries such as India by 2008.

After a three-year downturn, Gartner now expects to see the first annual pickup in purchasing of computer services and wireless telecommunications this year, and for solid growth in hardware and software to return in 2004

Overall, Gartner forecasts global technology spending to grow 5.4 percent to $2.40 trillion in 2004 over the $2.27 trillion expected to be spent in 2003.

It forecasts yearly growth of around 5 percent in each subsequent year through 2007 to $2.77 trillion, representing solid growth in historical terms but only half the 9 percent to 10 percent growth rates seen in the late 1990¨s boom years.

The biggest gains are expected in computer hardware, which should grow 4.4 percent to $355 billion in 2004, from flat growth in 2003, and negative growth of 2.2 percent in 2002. Software is expected to jump to 7 percent from 2.2 percent growth this year and to average 8 percent growth through 2007.

Gartner says the vast bulk of corporate and government spending will remain focused on keeping core technology systems up and running or figuring out how to share costs by running these operations or hiring outsiders to handle the work.

However, some technology vendors at the Gartner conference expressed reservations, saying that while spending patterns have stabilized over the past year or two, they have yet to see signs of a rise in computer budgets.