The budding economic recovery doesn't mean that the nightmare budgets of 2001 are gone for good. Yes, the average IT budget has increased by 9% in 2002, but our second annual spending survey shows that the purse strings have been loosened only in larger companies, in certain industries, and for a select few IT budget areas. IT budgets at small companies have actually dropped by an average of 8% since last year. Still, many projects that were put on ice last year are back, and IT executives continue to spend on a variety of new technologies. The bottom line: 2002 won't hit the 7.8% compound growth levels of the pre-Y2K days, but it sure beats 2001.

Far fewer projects are being put on the back burner in 2002 than in 2001. Only about three out of 10 respondents say they are delaying or de-ferring spending on IT projects in 2002, compared with about three quarters of respondents in 2001. Likewise, just half as many firms are cutting or eliminating spending on IT initiatives this year as last.

Two thirds of IT execs say the IT budget is under closer scrutiny this year than last. Perhaps in response, companies are requiring that IT align itself with business strategy more closely, and more firms are adopting metrics to assess their IT investments.

The spending outlook for 2003 is far brighter than for 2002: Close to two thirds of smaller firms and 46 percent of larger companies are projecting IT budget increases. If they are right—and many IT execs doubt actual spending will match their budgets—IT budgets at smaller companies will rise 17% on average and 11% at larger companies.

This article was originally published on 06-14-2002
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