The current pall over the IT industry is lifting, according to a survey from AMR Research that points to a boost in IT spending in this year's third quarter.
But don't look for the market to return to the go-go years of the late 1990s, analysts from the Boston-based firm said. According to a survey last month of 200 manufacturing and service companies, IT spending rose 4.3 per cent during the quarter, up from a 3.4 per cent rate of growth in the prior quarter, AMR said.
However, growth remained uneven, companies continued to trim costs by outsourcing IT functions, and deal sizes remained flat, analysts said.
Companies were still reluctant to launch large business-application projects, especially given the complexity of software already in place, AMR analyst Bruce Richardson said.
"There is a growing backlash over the high cost of upgrades, forced upgrades and the high cost of maintenance," he said. "We 'feature-functioned' people to death. There is way too much functionality in these products, and companies want to go longer between their upgrades."
As a result, companies would likely push to simplify and connect their business processes, increase automation and make individual employees more productive, Richardson said.
He noted that Dell had a goal of generating revenue of $US1 million per employee. Such plans meant that companies would outsource IT operations to other countries, something enabled in part by technology such as Voice over IP (VoIP), which makes it financially feasible to place service calls from the UD to locations such as India.
Ultimately, companies are also more focussed on business processes than on technology itself.
"This is the post-technology era," Richardson said. "It's not about gadgets and gizmos. Nothing is exciting the buyer these days. Maybe the buyer has no money."
The IT market itself continued to change, with technology costs declining even as features and power increase, AMR Chief technology officer, Scott Lundstrom, said.
Companies now buy in higher volumes for lower prices, so the average deal size remains the same.
"All growth comes by finding volume," he said.
The following were among some of AMR's other survey findings: 38 per cent of the companies polled said customer service would be their central focus in 2004; 24 per cent said they would be making most of their investments in networking and communications technology in the next year; ERP vendors were seen as the best source for integrated applications by companies hoping to avoid cobbling together a suite from smaller best-of-breed vendors.