Researcher says comms-networking segment among least affected by IT falloff

Oct. 18, 2001
October 18, 2001 New forecast says other segments will be hit hard as IT spending declines for the first time in a decade.

Cahners In-Stat (www.instat.com), in a recently introduced study, predicts that overall information-technology (IT) spending in the United States will decline for the first time in a decade. But, the company says, communications services and networking are among the areas of IT least affected by the downturn.

The group provided the following per-firm IT spending projections for this year.

* 1,000 or more full-time employees: $19 million, down 18% from last year.

* 100 to 999 full-time employees: $846,000, down 13% from a year ago.

* 5 to 99 full-time employees: $70,000, down 17% from last year.

* Fewer than 5 full-time employees: $6,000, down 27%.

The study, "Entering the Access Era: IT Spending and the Factors Influencing IT Purchases" provides a five-year forecast for spending in IT areas including communications, networking, systems, applications, personnel, and outside services. "Areas of IT spending expected to be least affected are communications services and networking, and outside services like applications integration and hosting," the company said.

"The impact of the September 11 events is expected to drive spending further downward, particularly among smaller companies of less than 100 full-time employees, where business failures are believed to be on the rise," the group said in announcing the new study. "This, combined with smaller IT budgets overall in 2001, should lead to falling IT spending among U.S. businesses this year and a slow recovery in the future."

"This is literally a 'new' economy," says Kneko Burney, director of In-Stat's e-business infrastructure and services research. "The unfortunate reality is that many businesses over-invested in IT products and services in 2000, creating conditions for sluggish demand in 2001. This alone was expected to lead to a decline in IT spending prior to September 11. However, one month after these events, we believe the fear and economic uncertainty following will lead to a freeze in IT investments for the next few months, and will continue to negatively impact our economy and IT spending well into 2002."

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