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IBM CEO Palmisano Forecasts IT Spending Growth

By Keith Regan
Nov 13, 2003 8:16 AM PT

IBM CEO Sam Palmisano has said private enterprises plan to increase technology spending by as much as 4 percent next year, offering the first quantified look at the recovery that technology firms have hinted at in recent weeks.

IBM CEO Palmisano Forecasts IT Spending Growth

Palmisano said meetings with private customers indicate widespread increases in information technology budgets, although most companies plan modest boosts of between 2 and 4 percent.

"We're seeing people planning for next year -- around the world -- to begin to take up spending in IT," he noted. "We haven't seen that in the past couple of years. That's modest growth, but still, it's better than people reducing their spending."

Palmisano's comments, which came after IBM executives met with top customers, including General Electric and Cisco, to discuss how Big Blue's on-demand strategy is being implemented, appear to mark the first time a tech executive has detailed the degree to which business will grow during 2004.

In general, however, companies have predicted an upturn. In fact, IBM said in a recent earnings release that it could add up to 10,000 workers during 2004 to meet demand in expanding areas, such as Linux implementation. Number two chipmaker AMD recently said it, too, could add workers next year.

Voices Carry

Research firms also have been predicting more IT spending will occur in 2004 as a number of factors converge to boost the industry. They often note that consumers already are spending more heavily, as are some governments.

For example, Gartner has said overall computer spending could expand by as much as 10 percent next year, while IDC recently predicted 5 percent growth in IT spending, with the possibility of additional expansion if the right economic pieces fall into place.

- "If the trends in the U.S. continue and the world economy perks up, we could be looking at even greater growth," IDC analyst Stephen Minton told the E-Commerce Times. While growth levels likely will never return to peak dot-com boom levels, he said, "pent-up demand has reached unprecedented levels."

Meeting Demands

Palmisano made his comments after meeting with key IBM customers to tout advances in Big Blue's on-demand strategy, which the company claims can unlock massive amounts of IT power that enterprises already have purchased but have not fully utilized.

The meeting included presentations from eBay and GE executives who explained how IBM's on-demand approach has worked for them.

Also on Thursday, IBM announced it has acquired a firm that makes self-checkout solutions for retail stores. The company did not disclose what it paid for privately held Productivity Solutions.

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