The slowdown in the computer industry has created an ideal
environment for hammering out attractive IT deals with
suppliers.
The IT services and software sector will remain a buyer's market
until new technology arrives, according to Richard Holway, the
author of the influential Ovum Holway report.
Holway said the slowdown in IT spending is likely to continue for
at least the next two to three years and, as a result, prices are
likely to remain attractive. "It is most definitely a buyer's
market," he said.
"For suppliers, any type of contract is good at the moment," said
Holway. "For users, now is a very good time to negotiate these
contracts."
The report, released this week, revealed that revenue growth rates
of IT services and software companies have fallen from a record
high of 25% in 1998 to 9.5% in 2000 - the first time growth has
been below 10% since the recession of the early 1990s.
"The Y2K hangover, combined with the bursting of the Internet
bubble, created a period of 'reflection' for many users," said the
report.
"Companies are not building new systems - Y2K has been and gone and
e-commerce infrastructures have been built," explained Holway.
"Until compelling new technology is released, they will not need to
do so again."
According to Holway, the supplier companies that are doing best in
this "difficult environment" are those with long-term customer
relationships, high recurring revenues and forward order
books.
He said the possible introduction of the euro could be the next
spur for spending as companies would need to change their IT
systems to cope with the new currency.
Daniel Thomas
daniel.thomas@rbi.co.uk