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Large Organisations revise IT spending forecasts to 2.8% Growth

11 January, 2007

Organisations with more than $1 billion in revenue have reforecast their IT spending increase for 2007 to 2.8 percent, according to a new Gartner Consulting Worldwide IT Benchmark Report.

These spending projections are down from research collected by Gartner during the first half of 2006. At that time, IT spending for 2007 was forecast to grow at 6 percent.

“A number of factors have combined to force enterprises to lower their IT spending forecasts from the first half of 2006,” said Jed Rubin, director, Gartner Consulting. “Looking back at the distribution of spending in 2006, enterprises spent more to support core business operations. This includes spending to support increasingly complex infrastructure and applications requirements, rising energy costs, regulatory requirements and other non-discretionary spending to keep the business running. This increased ‘run the business’ spending has consumed budget resources that were originally earmarked for more strategic and transformational investment. IT leaders are now planning to optimise their spending in these areas in the year to come.”

According to the research, growth and transformation remain the top priorities for enterprises in 2007, but any new investments need to be funded by a significant reduction in existing ‘run-the-business’ spending. To support these priorities, IT organizations will subsequently need to reduce their ‘run the business’ budgets by nearly five percent in 2007.

The new 2007 version of the Gartner Consulting Worldwide IT Benchmark Service and the Worldwide IT Benchmark report includes five volumes of comprehensive IT spending and performance data across 20 industries. The report highlights comprehensive IT spending plans of more than 1,500 companies with more than $1 billion in revenue, combined with historical spending and performance data on more than 10,000 companies worldwide. This allows companies to look at key cost and performance indicators by IT domain to gauge and manage organisational effectiveness and performance optimisation.

The research shows that IT spending forecasts differ by industry. In 2007, the most significant difference in IT spending growth will be in the Media industry, up to nearly 7 percent from 4 percent in 2006. The consumer products industry will see the biggest decline in IT spending in 2007, as spending is expected to decline by nearly 6 percent, down from an 8 percent increase in 2006.

Industry IT Spend Change 2006 vs 2007

Consumer Products
 -5.6%

Food & Beverage Processing
 -0.4%

Insurance
 0.6%

Government
 1.3%

Utilities
 1.5%

Electronics
 2.1%

Metals & Natural Resources
 2.2%

Professional Services
 2.5%

Education
 2.7%

Telecommunications
 2.8%

Manufacturing
 2.8%

Energy
 3.0%

Banking & Financial Services
 3.2%

Information Technology
 3.6%

Transportation
 3.6%

Construction & Engineering
 3.8%

Retail
 5.0%

Hospitality & Travel
 5.1%

Chemicals
 5.4%

Health Care
 5.6%

Pharmaceuticals & Med. Products
 6.4%

Media
 6.9%

Database Average
 2.8%

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