G-S IT SPENDING SURVEY RESULTS just released...
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IT MANAGERS EXPECT UNDERSPENDING TO LAST THROUGH YEAR-END.
Although we continue to expect some seasonal improvement by the end of the year, our survey indicates that, on the margin, budgets have tightened further. More than half of our respondents expect to underspend their remaining budget through the balance of the year, while a greater proportion of respondents than in any of our surveys so far this year indicated that they expect down 2002 spending.
THE OUTLOOK FOR SPENDING RECOVERY CONTINUES TO GET PUSHED OUT.
Those not expecting to return to normal IT spending growth rates until after 2003 rose again to 34%, versus 26% and 17% in our last two surveys.
RESPONDENTS' VIEW OF 'NORMAL' SPENDING RATES REMAINS SUBDUED.
Only 11% of our respondents (a new low for our survey) indicated that they believe their normalized IT spending growth is 10% or greater. On average, our respondents currently believe their long-term spending rate is about 6%. As we have mentioned in prior surveys, annualized IT spending growth of 10%- 13% has been the historical norm.
EXPECTATIONS FOR Q3 SPENDING LOOK ROUGHLY IN LINE WITH STREET ESTIMATES.
On a more positive note, most respondents (71%) indicate that they expect third-quarter sequential spending to be flat or slightly up. This foots approximately with current consensus revenue growth estimates for enterprise-facing IT vendors, and may give a little bit of comfort regarding current third-quarter expectations, barring further budget tightening by upper management.
INDICATIONS OF PENT-UP DEMAND MOSTLY REFLECT TOP PRIORITIES WE KNOW WELL.
We attempted to identify areas that are likely to rebound the most once budgets loosen up and spending starts to flow a bit more freely. With a few exceptions, the results tended to reflect the ordering of priorities in our recent surveys, with areas like security and storage software ranking highest. A couple of high-ranking surprises included CRM and enterprise portal software.
TOP SHARE GAINERS IN OUR LATEST SURVEY.
Top share gainers in our latest survey include Cisco, Dell, EMC, and Veritas. Other companies showing notable strength included Compaq, Hitachi Data Systems, IBM, Internet Security Systems, Oracle, PeopleSoft, and StorageTek.
ADDITIONAL DETAIL
THE STATE OF IT SPENDING: MORE TIGHTENING
* Our IT managers' view of their pricing leverage has not changed meaningfully since we began asking the question in March, with 64% indicating their pricing leverage with vendors is still on the rise.
* About half of our respondents have been underspending their budgets to some degree so far this year. About the same proportion expects to underspend their budgets through the rest of the year.
WHERE IS THE PENT-UP DEMAND?
* Areas of high pent-up demand included security, customer relationship management (CRM), storage software, Windows OS, and enterprise portals.
* Areas of lower pent-up demand included mainframes, Linux servers, and data switching.
TOP SPENDING PRIORITIES BY TREND/THEME
* Information security and application integration pushed ahead of cost- cutting into the top spots. Newer, early adopter technologies like network convergence and managed network services do not appear compelling enough to overcome current budget tightness.
SHARE GAINERS
* Storage-EMC, Hitachi Data Systems, StorageTek.
* Hardware-Dell, Compaq, IBM.
* Software-Veritas, PeopleSoft, Oracle.
* Security-Cisco, Internet Security Systems
OTHER TAKE-AWAYS
* Our survey shows less 'shelfware' than is widely feared. Only about 20% of respondents feel they have a moderate amount or a lot of shelfware.
* Systems integrator business should be able to grow despite slow application sales. Respondents believe that only about one-third of their consulting spending is closely tied to software purchases. |
