Nearly two years ago, many experts predicted that a rebound in information technology spending was just around the corner.
But the technology business, including the dozens of local consultants and suppliers that thrived here in the late 1990s, is still waiting.
With 2003 quickly approaching, industry analysts are now curtailing their optimism and forecasting that if a pickup does occur at all in the next 12 months, it will look more like a slow, sloping curve than a spike.
In November, two industry research firms said information technology spending would grow in 2003, but at a markedly slower pace than in the late 1990s.
"We think the market is recovering slowly; you can see some growth. And we believe next year will be a year of steady growth," said Stephen Minton, program director with Framingham, Mass.-based IDC. "But we don't think that over the next four or five years we are going to be back up to the peaks that we had during the boom."
IDC forecast a growth rate of more than 5 percent for the worldwide information technology industry in 2003 but warned that software spending could be a weak spot and that growth in the United States could be slightly more restrained than in the rest of the world. According to IDC projections, the industry shrank 2.3 percent this year -- its largest decline ever.
Last month, Gartner Inc. of Stamford, Conn., predicted that spending on technology services would grow 6.2 percent in 2003. But a Gartner survey of technology users and executives conducted in October showed less reason for optimism. The survey found that technology budgets are expected to decrease 0.03 percent next year.
"The market is quite interesting in that there seems -- and I use the word 'seems' -- to be a lot of opportunities. But I'm uncertain that that's translating into closed business at this point in time. The key is getting a signature on a contract to go forward," said J. Jeffrey Fox, chief financial officer of OAO Technology Solutions Inc. in Greenbelt.
Any recovery that the industry does see in 2003 will be nominal to moderate, according to John S. Brittain, executive vice president and chief financial officer of Fairfax-based American Management Systems Inc.
Those companies successfully catering to government buyers may continue to escape the fate of their commercial counterparts. New government regulations, intelligence spending and potential military action all contribute to a stable spending base, said J.P. "Jack" London, president and chief executive of Arlington government contractor CACI International Inc.
"I think over the next two to three years, and I tie that to political cycles . . . we see really continued strong" spending on government and defense information technology and services, London said.
The larger recovery in technology services won't happen until businesses start spending, analysts say.
"IT spending is going to come back when businesses start expanding again. It's not going to be a new piece of technology or a new government regulation -- it's really about business expansion and business investment," said William R. Loomis, managing director of Legg Mason Inc.
Loomis said he expects modest improvement in spending during 2003 and stronger growth in the following years. Service providers and consultants may be the first to see improvement, he said, as companies take on new integration projects.
"The one thing that has fairly universal agreement is that the bottom has been reached. Corporate spending has gone as low as it's going to go," said Harris N. Miller, president of the Information Technology Association of America. "The question now is how much it's going to go up and when."