Users: Stimulus bill may not boost IT spending

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By Patrick Thibodeau

WASHINGTON (IDG) -- IT managers said the depreciation bonus included in the economic stimulus package signed into law by President Bush on Saturday will help keep IT costs down but isn't likely to boost spending plans at least for the next year.

Many firms, such as Betts USA Inc., have already set their IT budgets for this year. But Dennis Roell, IT manager at the Florence, Kentucky-based company, said the stimulus bill could nonetheless speed up equipment purchases in subsequent years.

A big IT concern "is being able to move on to new equipment when you need to," said Roell, whose company makes toothpaste tubes, among other things. But "if you are still waiting for things to depreciate, it just drags on how long it takes to get the new equipment."

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The stimulus bill provides a 30 percent depreciation bonus for three years on capital equipment, plus the amount of the normal depreciation schedule, typically five years for high-tech equipment, retroactive to September 10, 2001 and ending September 11, 2004.

The tech industry hopes that faster write-offs will lead to quicker upgrades. But end users and analysts said the tax benefit won't be driving IT spending decisions.

The accelerated depreciation "will make the calculations for return on investment obviously slightly better," said Ashok Bakhshi, IT director at Schindler Elevator Corp. in Morristown, New Jersey, "but this will not force us to make any decision."

The economically hard-hit IT industry pushed hard for the stimulus bill. In 2000, IT spending, including hardware, software and services, grew 11.1 percent, to $444 billion, but then contracted, falling 1.8 percent in 2001 to $436 billion, according to Kevin White, an economist at IDC in Framingham, Massachusetts.

IT spending is estimated to increase this year by 4.6 percent to $456 billion, and the stimulus bill could increase that projection by as much as 1 percent, said White. But the main inhibitors to IT spending have been the general economy, the condition of corporate profits and the lack of cash for IT investments, said White.

Howard Rubin, an analyst at Stamford, Connecticut,-based Meta Group Inc., said companies are focused on lowering business cost. "They can't spend money to save money, and most of them are in the save money mode. And I don't think the stimulus bill answers that in the short term," he said.

Some firms, such as Harper Leather Goods Inc., made substantial IT investments as part of year 2000 remediation effort and that has reduced the need for new spending. The Bedford Park, Illinois-based manufacturer put in new networking, phone-switching systems and servers, said information systems manager Al Koepke. "We don't have a critical need right now," he said.

Ron Wells, information systems director at Carolina Turkeys Inc. in Mount Olive, North Carolina, can see a benefit to the depreciation bonus, but it won't change his IT investment plans.

"If we can get a benefit that would be nice," said Wells. But "to say that I would buy more and more frequently because of the depreciation ... probably not."