Corporate IT spending picking up for outside services

If you are an IT services provider and you're wondering whether business over the past two years has really been as bad as it seems, check out this research note from Computer Economics (CEI). From 1999 to 2002, large companies cut spending on outside IT services nearly in half, from 10.5% of their IT budgets to 5.7%. During the same period, mid-size companies cut such spending even more, from 10.4% to 5.2%. So, even if total corporate IT budgets remained relatively flat this period, spending on outside services was cut roughly in half.

But the worst may be over. According to the same study, spending in 2003 is projected to jump to 7.1% for large companies and 6.3% for mid-sized organizations. And, in 2004 spending is expected to rise to levels not seen since 1999: 8.3% for large organizations and 7.5% for the mid-tier.

CEI defines large organizations as those with over $750M in annual revenue and mid-sized organizations as those between $250M and 750M. Outside services includes contract services (e.g. help desk), project consulting, and temporary staff augmentation but does not include outsourcing of entire data centers or application development groups.