Study Finds Shift In IT Spending Priorities

Businesses will focus much of their IT spending in the coming months on improving communications and networks, while many are shifting resources away from more ambitious endeavors such as online marketplaces and E-commerce, according to a new study by Cahners In-Stat Group. "It's back to basics--companies are going back to traditional IT investments," says Kneko Burney, director of eBusiness Infrastructure and Services for Cahners In-Stat.

The study, released Wednesday, determined that IT spending is down 12% this year, based on interviews with 500 IT decision-makers from both large and small companies. The finding of a reduction in IT investments is consistent with research results in InformationWeek's third-quarter IT Confidence Index, which was released in September. Based on interviews with 300 IT managers, it found that spending this year has dropped 33% from last year.

Some companies, especially smaller ones, are finding that the Web is proving to be a better vehicle for customer information than E-retailing, according to Cahners In-Stat. "Not every business can be an Amazon.com," Burney says. The study also indicates companies will pull back sharply on capital equipment expenditures, such as mainframe and personal computers. Some businesses are also shying away from online marketplaces and other business-to-business technologies, including supply-chain software, due to constraints on IT budgets, Burney says. "Trading exchanges are a great concept, but the return on investment isn't easy to calculate," she says.

Besides networking and communications, according to the study, other areas that won't take a big hit with IT spending cutbacks include applications integration and hosting.