Goldman Sachs: IT spending to stagnate in 2003

Large US multinational companies remain unhappy with Microsoft's new licensing regime and as a result will barely increase IT...

Large US multinational companies remain unhappy with Microsoft's new licensing regime and as a result will barely increase IT spending next year, according to a survey from The Goldman Sachs Group investment bank.

The bank polled 100 chief information officers (CIOs) of US-based multinationals, and also found that for all the fanfare that came out of Hewlett-Packard after its acquisition of Compaq, HP is losing server and storage business.

Some 37% of respondents said they signed up with Microsoft's licensing program and were unhappy with it. Another 16% reported signing up and feeling neutral about the scheme. Some 7% who signed up were happy with the program. The remaining 40% had either not signed up or did not answer the question.

Respondents reported that Dell and IBM were gaining a greater share of their server spending while HP was losing ground. Around 43% of respondents said they are spending a larger share of their total IT budget on Dell's products than they did previously, while 28% of respondents said they are spending less on HP products.

HP is falling behind on storage, with 32% of respondents saying it is losing its share of their spending. EMC came top in storage with 33% of respondents reporting they were increasing spending on its products, followed by Network Appliance and Storage Technology (StorageTek).

Overall IT spending in 2003 is set to increase between 2% and 3% in 2003 compared with 2002, the survey found. This is below an earlier Goldman Sachs projection of 3% to 5% growth.

About half of respondents plan to spend more on IT in 2003 than in 2002, while 34% plan to spend about the same. The remaining 16% expect to spend less.

IT spending will not regain its normal year-on-year growth rate of between 6% and 7% until at least 2004, according to the survey. Moreover, what respondents are calling a "normal" rate of year-on-year increase in IT spending is about half of what it used to be historically, according to the survey.

As IT managers get stingy with their IT budgets, most respondents (68%) reported an increase in their ability to command favourable pricing from their vendors.

Still, even with the projected small growth, 2003 stands to be better than 2002, which on average will see a 1% decline in IT spending over last year, according to the survey. About half of the respondents expect to end 2002 having spent less than is allotted in their budget, while the other half expects to either spend according to plan or spend more, the survey said.

Respondents' IT spending priorities were information security, cutting costs, application integration, disaster recovery/business continuity, new software application deployment and development, and systems and storage consolidation.

Unsurprisingly, respondents said they expect security hardware and software to receive the greatest increases in spending over the next 12 months, along with data networking hardware, wireless LAN (local area network) hardware and storage software.

The lowest-ranking IT priorities were network convergence, managed network services, implementation of new technologies, staff hiring and retention, and replacement of ageing hardware.

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