• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Neha Kapoor

IT spending is looking up if one goes by the latest survey. Is it time to cheer?

IF the latest Goldman Sachs Global Equity Research survey is anything to go by, then global IT spending may well be out of the woods. Between the last Goldman Sachs survey on global IT spending to its latest one conducted in mid-June, growth figures for IT spending seem to have moved towards the road to improvement.

The survey report, aptly titled "At Last the Bleeding Stops," says, "Our latest IT Spending Survey, taken in mid-June, shows general improvement in spending intentions for the first time since the inception of our survey series in the fall of 2001. Although much of the rebound is simply a bounce from the highly depressed results of our April survey, there are indications that the second half spending outlook has improved somewhat. Our survey's first inquiry into 2004 spending plans suggests a preliminary expectation of modest growth of 3.5 per cent for the IT budget (all expenses including staffing and services) and about 5 per cent for the capital portion of tech spending (i.e., hardware and software)."

The Goldman Sachs IT Spending Survey comprises a panel of 100 senior IT managers from Fortune 1000 multinational companies.

According to the report, "The somewhat polar distribution of our 2004 capital spending question suggests that there may be a significant camp of users who will need to accelerate capital spending next year due to business requirements after prolonged cutbacks. This sort of maintenance spending could provide a notable stimulus to 2004 spending."

The survey would have us believe that CIO sentiment is finally bottoming out with 2003 IT spending improving — from -3.2 per cent to 0.4 per cent. "Additionally, fewer of our IT managers are now expecting incremental near-term budget tightening at 59 per cent of respondents, down from 72 per cent - 75 per cent in our prior two surveys."

Further, a majority of the respondents — 56 per cent — still do not expect spending acceleration until 2004 or beyond with the September quarter spending expectations appearing to be in line with current street estimates. "Most of our panel is pointing towards flat-to-up spending in the September quarter, generally consistent with latest First Call estimates showing 2-3 per cent sequential revenue growth for the median enterprise-facing tech vendor," says the report.

The report further adds that while prior (April) results likely represented the bottom for its panel's spending expectations, the overall outlook remains sober. "Latest 2003 budget expectations of -0.4 per cent, while improved, are still a little lower than our February 2003 survey, which pointed to 1.0 per cent growth. Furthermore, pricing difficulties showed further entrenchment in our latest survey, with an increased proportion convinced that pricing pressure is still on the rise."

Meanwhile, as per the survey, the latest expectation for a normalised IT spending growth rate is 5.7 per cent... . " an improvement over the 5.0 per cent-and-lower readings of recent surveys, and closer to the 6-7 per cent range that respondents indicated through most of 2002. However, latest indications remain well below the historical IT spending growth rate of about 10 per cent."

Even so, the survey report says that the strong upward moves of some `IT staples' such as database software and professional services, both of which have consistently been towards the bottom of spending priority rankings, could be an additional sign of improvement to the spending outlook.

In terms of application rankings, "the usual suspects remained in the top-tier of our panel's spending priorities, including wireless LAN connectivity, security, portal software, VPN, storage management software, and Web application server software."

As for hardware, Dell and IBM seem to have retained their top-ranking positions. "On the storage side, Dell and IBM have shown improving mind share alongside perennial share gainer EMC." And on the software front, the survey report says, "SAP's re-entrance into the top ranking is consistent with our view of the company's consolidating market share." Other top share gainers in software include Red Hat, Microsoft, Check Point, Symantec, and Veritas.

nehak@thehindu.co.in

Article E-Mail :: Comment :: Syndication

Stories in this Section
Smoke signals

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line