Report: Tech Spending Slump To Deepen Before Recovery

Most large companies will curb spending on technologyin 2002, according to a new report by Forrester Research(Nasdaq: FORR), but a comeback is expected to beginlater this year.

“We’re forecasting a recovery in the tech sector tobegin in 2002, with modest growth in the latter partof the year, then hitting its stride with double-digitgrowth in 2003,” Forrester analyst Tom Pohlmann toldthe E-Commerce Times.

Sluggish Spending

On average, technology spending by large companieswill drop 14 percent in 2002, according to the report,which polled 900 top executives at firms that each bring inmore than US$500 million in revenue.

“Compared with 2001, companies are much morerisk-averse when considering new technologies, optingto make do with what they have before buying more,”Pohlmann said.

The report projected that spending on e-commerce technology will dropfrom 3.5 percent of revenue, or $41 million, in 2001to 3 percent, or $29 million, in 2002.

“No particular companies brought down the spending.But in terms of specific industries, the retail andhigh-tech sectors seemed to scale back theirtechnology purchase plans the most,” Pohlmann noted.

Selective Shopping

Companies plan to keep buying necessities — 61percent of the largest companies said they will considerpurchasing hardware, software or network services.

However, large firms are more reluctant to invest inenterprise-level technology like CRM, enterpriseresource planning and procurement applications. Just26 percent said they will consider purchasing enterpriseapplications in 2002, down from 58 percent in 2001, accordingto the report.

Companies also are less likely to seek outside helpwith technology. The number of firmsconsidering technology consulting services dropped 28percent from last year, though there is still strong demand for such services in the insurance, manufacturing and utility industries.

Improvement Ahead

Large companies still expect to see a marked increasein online commerce, however. The executives polled byForrester estimated that their online-generated 2002revenue made up 7.3 percent of overall corporate revenue,up from 5.7 percent in 2001, and they projected that figurewill reach 20 percent in five years.

“Despite the economic downturn, companies stillbelieve that technology will make a huge difference indriving business results,” Pohlmann said

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