IT spending within all technology sectors remained below anticipated levels in June, according to the Gartner Technology Demand Index, an index included in a monthly economic indicator service launched by Gartner, Inc.

According to a weekly poll drawn from a 20,000-member Gartner panel of IT decision-makers from small, mid-size and large businesses, U.S. businesses spent below their budgeted levels, recording 90 percent on the Gartner Technology Demand Index for June. A 100 percent total would mean businesses spent exactly what they had budgeted for the month.

"Continued economic weakness and uncertainty have resulted in a situation where, in general, recovery has been slow to materialize," said David Hankin, senior vice president and general manager of Gartner. "IT decision makers appear to be holding a firm line on budgets, keeping current spending below their budgeted expenditures for this quarter."

Gartner analysts said the Technology Demand Index reflects a stalled recovery, with no particular sector emerging from the pack as a leading indicator of spending direction. The networking and telecommunications sector showed the best results for the month, with spending levels reaching 93.19 (see Table 1). Analysts said there are signs the telecom equipment segment is improving from a two-year revenue decline, while telecom services are experiencing increased mobile usage at the expense of the fixed public networking providers.

Table 1: Gartner Technology Demand Index for June 2003
Sector Spending Index
Hardware 88.03
Software 84.25
Networking and Telecommunications 93.19
IT Services 80.94
Aggregate Overall IT Spending 90.08

Note: An index of 100 would mean actual spending totaled the projected budget for the month. Source: Gartner (July 2003)

Major software industry changes were augured in June, with Oracle's announced tender offer for PeopleSoft and PeopleSoft's merger with J.D. Edwards. Gartner surveyed 559 IT decision-makers in June to gauge what influence the announced mergers are having on IT buyers. The survey showed 81 percent of IT decision-makers said the acquisition news will not change their overall software spending plans during the next several months, while 12 percent of those surveyed said they will delay related software purchases until the situation becomes clear.

"While one might expect that PeopleSoft and J.D. Edwards would have been significantly impacted in buyers preference plans by Oracle's tender offer, we find that there was no statistically significant difference in the proportion delaying purchases among potential clients for each of the three companies: Oracle, PeopleSoft and J.D. Edwards," Hankin said.

"Some clients reported that Oracle's bid for PeopleSoft has caused them to delay their purchase until the situation becomes clear," Hankin said. "However, we find there was no statistically significant difference in the proportion delaying purchases among potential clients for each of the three companies: Oracle, PeopleSoft and J.D. Edwards."

For more information on Gartner IT Watch, e-mail ITWatch@gartner.com or visit http://www3.gartner.com/1_researchanalysis/ITwatch.jsp.

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