No halt to IT spending drop

Many businesses over-invested in IT products and services in 2000, creating conditions for sluggish demand in 2001. Experts expect the IT spending woes to continue into 2001 as the effects of the September 11 terrorist attacks further slow the economy.

"One month after these events," says Kneko Burney, Director of e-business Infrastructure and Services at Cahners In-Stat, "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."

Analysts at the Scottsdale, Ariz.-based market research firm expect 2001 business IT spending to experience a fall of more than 12% from 2000 estimates, marking the first decline in total business IT spending in the last decade. They expect reaction to the recent attacks to drive spending further downward, particularly among smaller companies, where business failures are on the rise.

In-Stat also found that the least likely areas of IT spending to be affected by the decline in spending are communication services, networking, and outside services, such as applications integration and hosting.

A recent In-Stat report, "Entering the Access Era: IT Spending & the Factors Influencing IT Purchases," found the following estimates of per firm IT spending (products, services and personnel):

  • Enterprise (1000 full-time employees): $19 million in 2001, falling 18%
  • Middle Market (100 to 999 FT employees): $846K in 2001, falling 13%
  • Small business (5 to 99 FT employees): $70K in 2001, falling 17%
  • SOHO business (<5 FT employees): $6K in 2001, down 27%
The report provides five-year forecasts of IT spending among the four U.S. business segments including, communications, networking, systems, applications, personnel and outside services.

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About the Author

John K. Waters is a freelance writer based in Silicon Valley. He can be reached at [email protected].