Sunday, March 9, 2008

Business Spending on Technology Infrastructure $250 Billion in 2006

U.S. businesses spent $250.7 billion on information and communication technology equipment and computer software in 2006, an increase of 6.3 percent from 2005, according to a recent report from the U.S. Census Bureau.

The report, Information and Communication Technology Survey, presents annual data on noncapitalized and capitalized business spending for information and communication technology equipment and computer software. It serves as a supplement to the broader Annual Capital Expenditures Survey report.

Noncapitalized expenditures are expenses for assets that have a useful life of more than one year and are written off in the same year in which they are made. Capitalized expenditures are expenditures for assets that have a useful life of more than one year and are usually depreciated.

Of the total spending in 2006 on information and communication technology equipment and computer software, sometimes referred to as e-business infrastructure, noncapitalized spending accounted for $90.8 billion (36.2 percent), and capitalized spending accounted for $159.9 billion (63.8 percent). Noncapitalized spending in 2006 was unchanged from 2005, while capitalized spending increased 10.9 percent.

Rapid technological advances in e-business equipment, such as computers, telephones, fax machines and electromedical apparatus, have resulted in these assets being replaced much more quickly than other types of equipment. Many companies write off the full cost of these assets during the year of purchase rather than depreciating the cost over two or more years.

In the three categories of noncapitalized spending on e-business infrastructure, purchases of equipment accounted for $18.6 billion; operating leases and rental payments, $18.2 billion; and computer software expenditures, $54 billion.

-- The largest share of noncapitalized equipment purchases, $13 billion, went for computers and computer peripherals, a 6.4 percent increase over 2005.

-- The largest share of noncapitalized operating leases and rental payments, $11.8 billion, went for computer and computer peripherals.

-- The largest share of noncapitalized computer software expenditures, $30.7 billion, went for purchases and payroll for developing software. The rest, $23.3 billion, went for software licensing and service/maintenance agreements.

Two categories accounted for total capitalized spending on e-business infrastructure in 2006: purchases of equipment, $100.6 billion, an increase of 6.8 percent from 2005; and purchases and payroll for developing software, $59.3 billion, an 18.4 percent increase over 2005.

Other highlights:

-- In 2006, about 77 percent of noncapitalized spending and about 75 percent of capitalized spending was concentrated in five business sectors: information; finance and insurance; manufacturing; professional, scientific and technical services; and health care and social assistance.

-- The information sector spent $62.7 billion on equipment and computer software in 2006, an increase of 13.7 percent from 2005. That represented 25 percent of all spending in e-business infrastructure in 2006. Of the sector total, 22.3 percent went for noncapitalized expenditures; 77.7 percent went for capitalized expenditures.

-- Spending in the finance and insurance sector for equipment and computer software totaled $48.3 billion. Of this amount, $20.8 billion went for noncapitalized spending and $27.5 billion for capitalized spending. The finance and insurance sector accounted for 19.3 percent of total e-business infrastructure spending in 2006.

-- The manufacturing sector spent $34.9 billion for equipment and computer software in 2006, an increase of 5.6 percent from 2005. Of this amount, $16.9 billion was for noncapitalized expenditures and $18 billion for capitalized expenditures. Manufacturing accounted for 13.9 percent of total e-business infrastructure spending in 2006.

-- Spending for the professional, scientific and technical services sector totaled $25.9 billion in 2006. Of this amount, $12.2 billion went for noncapitalized spending and $13.6 billion for capitalized spending. This sector accounted for 10.3 percent of total e-business infrastructure spending in 2006.
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