U.S. IT SPENDING UP SHARPLY

December 8, 2000

COMMERCIAL NEWS

Stamford, CONN. — Technology spending is up sharply in the US, according to the Worldwide IT Trends & Benchmark Report 2001, released by META Group.

Spending on information technology (IT) by US business organizations, as a percentage of gross revenues, increased 8.7% in 2000, compared to a 3.4% increase in 1999. The study is drawn from the world’s largest database of more than 16,000 IT contacts, representing 6,000 companies in 28 nations. Data is reported in 35 industry sectors. IT spending among non-US business organizations was down 20% from 1999.

Companies are investing in networked computer and Web-based applications to take advantage of global markets opened by the new economy, according to the report. Twelve percent of applications developed in the US utilize the Java programming language, which is used for Web-based applications, up from 1% in 1999. Similar gains (12.7%) were posted for the use of C++ as a programming language. The emphasis on new development is in client/server environments. Thirty-two percent of worldwide development is targeted at client/server, 27% at mainframe environments, and 19% at the network and workstation environments.

“Internet-based operations are taking precedence in IT organizations,” said Howard Rubin, META Group research fellow and author of the report. “As business becomes more reliant on the Internet, efficient file servers and fast networks are becoming critical elements of success.”

With the focus on networking, the majority of US budgets was spent on data center and operations. Non-US companies are spending most on networks and data centers. Both US and non-US business organizations project budget increases in the next year, with US companies emphasizing maintenance and support, and non-US companies expending the most effort on new development.

Worldwide, the IT work year is significantly longer than in years past. Working hours per year for the IT professional increased substantially this year, up 36% from last year in the US and up 30% in non-US companies. The average IT professional in the US works 2,157 hours per year. The average IT professional outside the US works 2,138 hours per year.

“This remarkable increase in working hours could be explained by the growing business dependence on networking and Internet technologies to accomplish IT goals,” said Rubin.

Investment in training worldwide is on the rise for the first time in three years. In the US, the average number of training days per year is 8.05, up from 7.3 in 1999. The average number of training days for other nations is 8.44, up from 7.2 in 1999. The US continues to staff at lower academic levels than elsewhere in the world. However, the study shows that US employers are hiring higher percentages of graduate-level employees (11% last year compared to 19% in 1999).

“Perhaps we are seeing a learning curve as IT professionals work to master new tools,” added Rubin. “Both US and non-US companies experienced another increase in application portfolio size from last year. In the US, there was 4% growth, while elsewhere in the world, there was 35% growth.”

Compensation in the US is up 6.6% this year, compared to 6.4% in 1999, with the greatest increase in network-associated areas such as Inter/intranet specialists and network analysts/architects. India and many non-U.S. countries lag far behind in compensating IT professionals, although compensation levels among non-US countries is up slightly over last year. For an equivalent salary of one US professional, an organization could hire 9.1 professionals in India. Switzerland, however, has the world’s highest IT salaries. Compensation among IT employees in Switzerland is 18% higher this year than US IT salaries, but down from 36% in 1999.

IT staff turnover rates rose both in the US and worldwide. The rate in the US jumped to 11.4% this year, up from 8.4% in 1999. Turnover at non-US companies rose 12.6%, from 9% in 1999. The highest turnover rates were reported by organizations in India (16%), China and Switzerland (14%), the US, and Canada (10%).

Among the hardest jobs to fill in the US were project leaders, metrics personnel, testers, and intranet developers. Development programmers and network analysts were comparatively easier to recruit. Among non-US companies, testing and metrics staff, as well as quality assurance personnel, were the hardest to recruit; project leaders and systems analysts were comparatively easier to hire.

According to the report, the capacity to develop new products, as measured by the number of lines of code developed per professional, declined significantly this year. US new development productivity fell to 6.22 KLOCs (thousand lines of code) per professional per year, compared to 9.0 KLOCs in 1999, a 47% decrease. For non-US companies, new development productivity also declined over 1999 – 9.1 KLOCs compared to 7.05 KLOCs, respectively (a decrease of 29%).

The study found a slight decline in software quality in the US as measured by defects per KLOC, while the quality of software outside the US continued to improve. The defect rate in software released in the US increased slightly to 1.77 KLOCs, compared to 1.56 in 1999, 1.64 in 1998, and 1.69 in 1997. Outside the US, the defect rate dropped to 3.59 KLOCs, from 3.85 in 1999, and 5.23 in both 1998 and 1997.

The study also found that metrics usage jumped considerably this year. Nearly 53% of US companies actively use metrics, compared to 35% in 1999. Among non-US companies, 58% are using metrics this year, up from 47% in 1999. Most organizations that collect metrics do so monthly.

META Group helps companies make better information technology (IT) decisions by providing research and analyst consultation and consulting relevant to their specific business needs. For details, connect with http://metagroup.com .

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