Merrill Lynch: War will not hit IT spending

Merrill Lynch: War will not hit IT spending

The war in Iraq won't slow IT spending, but a quick resolution of the war won't boost spending either, according to US and European Chief Information Officers (CIOs) surveyed by investment bank Merrill Lynch.

Of the 100 respondents, 73 said the war in Iraq would not slow spending, while 17 said it would. A quick end to the war would only lead to a spike in spending with 10 of the respondents, while 90 said it would not, according to the survey.

Merrill Lynch released the results in a report late last week. Of the 100 CIOs surveyed, 75 worked in the US and 25 in Europe.

Even 17 per cent of CIOs deciding to cut their spending would spell trouble for vendors with less recurring revenue, such as storage specialist EMC and Sun Microsystems, Merrill Lynch said. The survey was conducted before the start of the war.

"In general, spending is hampered as much by structural problems in the economy as by war," a vice-president with Merrill Lynch, Steven Milunovich, wrote in the report.

Away from the war, the survey found that 66 per cent of the CIOs would like to increase the variable cost portion of their IT budgets, but 65 per cent did not see the utility computing schemes being promoted by vendors as the way to do that.

Fixed costs such as facilities and staff make up about 70 per cent of an IT budget today, and IBM, Sun and Hewlett-Packard promote "pay as you go plans" to swing that ratio. However, CIOs said these would not be a real option until 2006, the survey said.

More evangelising was needed for utility computing, Milunovich wrote.

Meanwhile, CIOs are spending more to buy servers. Of the CIOs surveyed, 55 per cent said spending on Windows servers was increasing, 38 per cent said more money was going to buy Unix servers and 33 per cent said spending on Linux servers was up. Budgets for mainframes were down or flat, said 63 per cent of the CIOs.

The interest in Unix servers was surprising, and suggested that Linux was not replacing Unix as quick as some in the market might have thought, Milunovich wrote.

The continued decline of mainframes was not new and mainframe rebirth was not expected, he wrote.

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