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IT spending to increase little in large companies

IT spending to increase little in large companies

Large multinational companies will increase their IT spending minimally in 2003, according to a recent survey conducted by the research unit of The Goldman Sachs Group investment bank.

The survey, which polled 100 chief information officers of US-based multinationals in August, also found much dislike among respondents for Microsoft's controversial new licensing plan. And for all the fanfare that came out of Hewlett-Packard after closing its Compaq acquisition, the survey found that HP is losing server and storage business among respondents.

But news is bad for IT vendors in general. IT spending will increase overall only between 2 and 3 per cent in 2003 compared with 2002, below an earlier Goldman Sachs projection of 3 to 5 per cent growth, the survey said.

Fifty per cent of respondents plan to spend more on IT in 2003 than in 2002, while 34 per cent plan to spend about the same, with the remaining 16 per cent expect to spend less, according to the survey.

IT spending will not regain its normal year-on-year growth rate of between 6 and 7 per cent until at least 2004, according to the survey. Moreover, what respondents are calling a "normal" rate of year-on-year increase in IT spending is itself about half of what it used to be historically.

As IT managers get stingy with their IT dollars, most respondents (68 per cent) reported an increase in their ability to command favourable pricing from their vendors.

Still, even with the projected small growth, 2003 stands to be better than 2002, which on average will see a 1 per cent decline in IT spending over last year, according to the survey. About half of the respondents expect to end 2002 having spent less than is allotted in their budget, while the other half expects to either spend according to plan or spend more, the survey said.

Thirty-seven per cent of respondents said they signed up with Microsoft's new licensing program and were unhappy with it, while another 16 per cent reported signing up and feeling neutral about it. Seven per cent who signed up were happy with the program. The remaining 40 per cent of respondents had either not signed up or didn't answer the question.

Server providers gaining share of respondents' IT budgets are led by Dell Computer and IBM, while HP is losing ground. Forty-three per cent of respondents said they are spending a larger share of their total IT budget on Dell's products than they did previously, while 28 per cent of respondents said they are spending less on HP products.

Another area in which HP isn't faring too well is in storage, where it is losing share with 32 per cent of respondents. Meanwhile, EMC ranked top in storage, with 33 per cent of respondents reporting they were increasing spending on its products, followed by Network Appliance and Storage Technology (StorageTek).

Software providers gaining share of respondents' IT budgets included Microsoft, Red Hat, Veritas Software, Oracle and Mercury Interactive, while companies losing business are Novell and Computer Associates International.

Respondents' IT spending priorities were information security, cutting costs, application integration, disaster recovery/business continuity, new software application deployment and development, and systems and storage consolidation.

Unsurprisingly, respondents said they expect security hardware and software to receive the greatest increases in spending over the next 12 months, along with data networking hardware, wireless LAN (local area network) hardware and storage software.

The lowest-ranking IT priorities were network convergence, managed network services, implementation of new technologies, staff hiring and retention, and replacement of aging hardware.

Along these lines, respondents expect these areas to receive the least increases in spending over the next 12 months: mainframes, supply chain management software, systems integration services, videoconferencing hardware, Unix servers and NT servers. The appearance of NT servers in this list indicates that Linux servers are gaining momentum, according to the survey.

In good news for independent providers of IT services, a majority of respondents said their choice of consultants and systems integrators has very little or no relationship to their choice of hardware, the survey found.

Fifty-nine percent of respondents said that when choosing a consultant or systems integrator, their hardware purchases count either "not at all" or "very little" in their decision. Another 32 per cent said hardware has "somewhat" of an effect on their choice, while only 9 per cent said it matters "very much", which the survey said "is probably a good sign for non-captive IT services providers in terms of their ability to compete with IBM-type services organisations".

Another interesting finding was that, despite Sun Microsystems' efforts, the company's StarOffice software suite has made nary a dent in the installed base of Microsoft's Office software suite. Sixty-nine per cent of respondents said they have no plans to even evaluate StarOffice. Only 1 respondent, or 1 per cent of the sample, said his or her company has switched or plans to switch to StarOffice for some of the company's employees.


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