U.S. Internet Infrastructure Spending Grows:
Businesses to Spend $200 Billion in 2004

Analysts project that businesses of all sizes will continue to invest in upgrading their infrastructures and use the Net to lure new customers.

by ISP-Planet Staff [January 17, 2001]

According to Cahners In-Stat Group, U.S. companies of all sizes are expected to invest heavily in their Internet infrastructure in the coming years.

The high-tech market research firm suggests that the Internet-specific investments of U.S. businesses are to account for nearly 26 percent of their total IT spending in 2004, up from just 15 percent in last year.

The biggest opportunities for technology providers will likely prove to be the "corporate market" or large and mid-sized businesses, which are expected to boost their spending on Internet technology and services from $49 billion in 2000 to $110 billion by 2004.

However, vendors targeting the small and home office business markets will also enjoy strong growth, as these businesses are expected to increase Internet-specific spending from $31 billion to $87 billion during that time.

Kneko Burney, In-Stat director of e-business infrastructure and services said U.S. Businesses of all sizes began seriously considering the Web to enhance their business models about 18 months ago.

Moving into 2001, the majority of firms are just now likely to realize some of the potential the Internet can offer them. How this happens will depend on the market," Burney said. "Larger firms see the Internet as a cost-effective means to improve communication across groups: employees, the supply chain, customers, etc. and are likely to improve the intelligence and robustness of this communication.

"In contrast, smaller firms are still defining themselves online," Burney added. "Given this, their focus will likely be to simply build a relevant point of presence on the Web and use it effectively."

In the corporate market, businesses are expected to focus on using the Internet to streamline their operations, namely connect remote employees and eventually enhance supply chain relations, likely using the portal/intelligent interface technologies.

About half of large companies and 44 percent of mid-sized firms indicated using the Internet to communicate in some way across a supplier/buyer network in 2000, In-Stat found. Small companies, especially firms with fewer than five full-time employees, are still "testing the waters" online and will need some time and guidance before they really integrate the Web into their day-to-day business processes.

However, a growing number of easy-to-use Internet services suggest these segments' transition online will be fairly smooth and possibly happen in just a couple of years or less.

In-Stat also found:

• Large companies (1,000 plus employees) accounted for 48 percent of business Internet technology spending in 2000
• From 2000-2005, large and medium-sized companies are expected to boost their spending on Internet technology by an average of 25 percent annually
• In the small and SOHO markets, firms are unlikely to keep their Internet infrastructures in-house as more easy-to-use, affordable services become available

The reports, All Business is eBusiness: Demand for Internet Infrastructure and the Build-up of Commerce Capabilities in the Middle & Enterprise Markets and in the Small and SOHO Business Markets, include analysis of Internet technology and services spending by U.S. businesses with forecasts through 2004.

The In-Stat reports also contain corporate Internet demographic data, analysis of Internet commerce infrastructures, e-commerce applications and Web site functionality.

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