Gartner Says European-Based Companies Plan to Boost IT Spending by Three Percent in 2006

Spending On Internal IT Staff Will Remain Flat

Egham, UK 12 October 2005 - European-based organisations plan to increase their investments in IT, but only at the minimum level necessary to maintain their IT departments and support the business, according to preliminary results from a recent survey by Gartner, Inc. In a preview into this year's Gartner Symposium/ITxpo to be held in Cannes, France, Gartner said that European companies plan to increase spending three percent in 2006, a slight improvement from the 2.5 percent spending increase in 2005.

"The survey results show a cautious and constrained picture of IT spending in Europe; it is not the spending recovery hoped for by the IT community," said Roger Fulton, vice-president and distinguished analyst at Gartner. "IT spending in Europe is closely aligned with gross domestic product (GDP) growth. Three of the four major countries in Western Europe are struggling to maintain economic growth, which is linked to the limited growth in IT spending."

Throughout the year, Gartner polls more than 400 organisations within Europe about their IT spending intentions. Among the European Union region, IT spending plans vary. "Companies in Germany, Spain and Portugal plan the largest IT budget increases (up six percent) for 2006 followed by the U.K. and Scandinavia, which aim at budget increases of less than four percent. In France respondents intend to raise their budgets by only 0.5 percent," said Robert De Souza, principal research analyst at Gartner. Companies in Belgium and the Netherlands intend to reduce IT spending by approximately two percent.

The results show that spending on security hardware and software will see healthy growth, although it is a relatively small percentage of the overall budget. Portable devices such as mobile handsets, laptops, personal digital assistants (PDAs) and tablet PCs will also experience healthy growth, while desktops will exhibit minimal growth and servers will see a decline.

Within software spending, front-office applications and enterprise system management will show positive spending patterns. Although front-office applications will show growth, spending will often come from discrete budgets that can be reduced at anytime, and this area remains the most vulnerable.

Within external IT services spending, consulting and IT training/education will show the highest growth, caused by the lack of spending in previous years. Like front-office applications, this spending is discretionary and can be the first to be reduced if necessary.

The survey suggests that spending on internal staff will remain flat. "Organisations plan as little as a two percent increase in IT staff costs and a reduction in IT contractor spending as they try to manage costs," said Mr Fulton. "Respondents in Europe will devote more of their staff budgets to project and programme management, IT administration, and system and network management in 2006."