In-Depth

IT Spending: Following the Money

Business leaders are focusing on strategic technologies, including BI, Web-based apps, and vertical solutions

• By Stephen Swoyer
• 05/30/2006

If IT spending is up—as most market watchers believe it to be—just what is it up on? Just how are IT leaders spending their budget dollars?

According to market researcher International Data Corp. (IDC), business leaders are focusing on strategic technologies, including business intelligence (BI), Web-based applications, and vertical industry solutions. This is a change of pace from the infrastructure upgrade-centric spending that has gobbled up the lion’s share of IT dollars over the last three years, IDC says.

The market watcher’s research yields other contrasts, too: for starters, IT markets should remain stable throughout the remainder of 2006, and—unlike the recent past—a majority of companies are strongly confident that their IT spending will be parceled out evenly over all four quarters.

Where is the money going? Security, not surprisingly, tops the list. Organizations still cite an increased awareness of security risks and available solutions, IDC says, which is good news for companies that market security-related products and services.

Though firms aren’t as concerned with infrastructure upgrades as they were in years past, they’re not ignoring the infrastructure, either. In fact, IDC says, infrastructure management and optimization is still a big spending driver.

All told, IDC researchers say, IT spending is a tale of three regions, each with very different buying patterns.

“There are some differences across the major regions in terms of the strategic drivers for IT spending increases and budget priorities,” said IDC vice-president Stephen Minton, in a statement. “In the U.S., many firms are shifting to a more strategic view of the business benefits to be derived from the adoption of solutions for real-time business performance monitoring, better managing customer relationships, and enhancing collaboration.”

Meanwhile, vertical industry solutions are big in China, Minton says. Elsewhere in Asia, Indian companies “are moving strongly towards evaluating or adopting Web-based applications, partly driven by security factors in the outsourcing industry and partly by a growing culture of innovation.”

EU firms, on the other hand, are caught in a kind of pincer between the U.S. and Asia-Pacific. “There is a danger that European firms are struggling to compete with strategic innovation from the U.S. on the one hand and low-cost competition from Asia on the other,” said Minton. “Overall, the survey results indicate that many European companies remain inhibited by a slightly conservative approach to new investment, although overall spending is expected to increase from 2005. Firms in China, meanwhile, indicated a surprisingly high level of concern over the possible negative impact from an economic slowdown within the next twelve months.”