part 1
from G-S this morning re: 5/8/03 meeting
CIO Sit-Down May 2003: Our CIOs Have No Illusions About State of Tech Spending
CIOs ANTICIPATE THAT EVEN 2004 IT SPENDING LEVELS WILL BE FAIRLY DULL, SUGGESTING A RANGE OF 0%-5% GROWTH. Our CIOs dismissed the idea of a 'second-half recovery' and indicated that their spending growth would remain rather dull in the foreseeable future as they meet only the most critical business needs, improve utilization, and see ongoing price deflation. One panelist summarized the IT spending environment as having 'absolutely, totally, fundamentally changed.'
BALANCE OF POWER WILL MOST LIKELY REMAIN WITH TECH BUYERS EVEN AFTER SPENDING BEGINS TO MODESTLY IMPROVE. We were struck by the almost combative stance our CIOs took vis-a-vis vendors' traditional sales and pricing tactics. Our panel communicated a fierce determination to put greater scrutiny on purchases, squeeze maintenance dollars, get higher returns on their investments, and eliminate unproductive time spent with too many vendors. As one CIO remarked, 'IT has to compete with business units.' Moreover, pricing erosion continues, though at a lesser pace.
STILL TOO MUCH EXCESS CAPACITY. Most of our panelists seemed to agree that utilization rates were still too low, resulting in a flattish outlook for hardware spend. Said simply by one CIO and echoed by another, 'I have too many servers.' The old solution of 'throwing more servers at a problem' has gone away with a drive for greater utilization and higher scrutiny of purchase orders.
TIGHTENING THE SCREWS ON SOFTWARE VENDORS. CIOs continue to tighten the screws on software vendors, reflecting a buyer's market with a diminished appetite for software. All panelists noted that the market would not likely see the good old days of software purchasing as enterprises continue to be highly frugal with IT budgets and increasingly focused on ROI, especially without the catalyst of the 'next big thing' in software. CIOs also continue to look for ways to reduce costs using open source software wherever possible and appear increasingly resentful toward vendor lock-in and proprietary solutions. |
