Prospects Good for Technology Spending
At least two surveys released Tuesday indicated that companies are starting to shell out more money for IT.
According to an August poll in CIO magazine, chief information officers plan to increase tech spending by an average 6.4 percent over the next 12 months, up from 4.5 percent in the previous month's poll. This marks the highest projected increase since May 2002.
In addition, IT budgets increased by an average of 2.8 percent over the prior 12 months, an improvement from the 1.3 percent increase reported in the July poll.
Nearly 9 in 10 CIOs report an applications backlog, according to the survey; that backlog is "significant" for roughly half of those executives surveyed.
Meanwhile, a new survey from AMR Research found that 80 percent of companies polled expect 2004 IT budgets to grow or remain stable. Overall, IT budgets are projected to grow by 2 percent in 2004.
"We are seeing purse strings begin to loosen up with the growing demand to replace older systems and the belief that the economy is beginning to improve," said Jim Shepherd, senior vice president of AMR Research. "Improving business processes" and "ensuring consistency across the enterprise" were Shepherd's recommendations for goals of IT investment.
According to the CIOsurvey, security software continues to be the strongest sector, with about 51 percent of respondents planning to increase spending. This figure is slightly lower than the 52.2 percent for the previous month, but only 2.5 percent plan to decrease spending, compared with the roughly 5.9 percent who planned to do so in July.
Nearly 46 percent of the panelists plan to spend more on computer hardware, up from 44.3 percent in July; 28.6 percent plan to increase their spending on infrastructure software, down from 33.2 percent in July.
In the AMR survey, spending on enterprise resource planning (ERP) — typically the largest single portion of the enterprise software budget, according to the research firm — is expected to increase to 27.2 percent of the total in 2004, up from 26.6 percent in 2003. Supply-chain management (SCM), the second-largest category, is expected to grow to 16.3 percent, up from 13.6 percent. The allocation for customer-management applications is expected to remain steady at 16 percent, according to AMR.
The survey also noted that more than 57 percent of surveyed companies are outsourcing applications development, and this will continue to remain a priority in 2004. Companies are outsourcing operations like web hosting and data centers, noted AMR — that is, operations for which they can expect to reduce costs and increase efficiency — while keeping core competencies in-house.
Short Takes
- Sara Lee Corp. hiked its common dividend by 21 percent, to 75 cents per share, due in part to the recent changes in federal tax laws regarding dividend income.
- Delta Air Lines will begin recalling the 250 pilots that were furloughed during the Iraq war, the pilots' union said on Friday.
- Duke Energy Corp. Friday filed a shelf registration to periodically sell up to $1.47 billion in notes, mortgage bonds, common stock, contracts, and units. It plans to use the proceeds to redeem outstanding securities and for general corporate purposes.
- MCI named five new members to its board of directors. They include distressed debt investor David Matlin, of MatlinPatterson Global Advisers LLC, who bought a big piece of MCI bonds; former U.S. Deputy Attorney General Eric Holder; Touche Ross chairman W. Grant Gregory; retired Bell Atlantic executive Judith Haberkorn; and Patton Boggs partner Laurence Harris.
- Larry A. Silverstein has joined Ryan Beck & Co. Inc., a subsidiary of BankAtlantic Bancorp, as executive vice president and chief financial officer, succeeding Leonard J. Stanley, who will assume the role of executive vice president and chief administrative officer. Silverstein joins the firm from US Trust Co., a subsidiary of Charles Schwab, where he was managing director, financial planning and analysis.
- Shareholders of Computer Associates International Inc. agreed to triple the base pay to $150,000 but eliminate stock options for its eight independent directors.
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