IT directors expect 4% budget growth

European chief information officers (CIOs) and IT directors expect a 4% increase in IT budgets this year, compared to an actual...

European chief information officers (CIOs) and IT directors expect a 4% increase in IT budgets this year, compared to an actual 2.6% rise in 2001.

They are more confident than their US counterparts who are predicting a 2% increase in 2002 following a real fall of 2.8% last year.

These are the headline figures of a survey by investment bank Merrill Lynch of 110 IT chiefs; 75 in the U.S. and the remainder in Europe.

While the survey is an authoritative indicator of sentiment the IT directors and CIOs polled have not always proved the best predictors of the future. In January 2001 those surveyed predicted a 12.1% increase in European IT spending and a 6.8% rise in the US.

The respondents' top priorities for spending in 2002 are security, enterprise resource planning (ERP) software, disaster recovery, Web development, Microsoft's Windows 2000 and storage.

Asked to rate their spending priorities (with 10 meaning most likely), CIOs indicated that they would spend money on security (which on average received a rating of 6.8), virtual private networks (6.2) and Web services (6.0).

The respondents' lowest priorities were storage outsourcing (1.9), Gigabit Ethernet-based metropolitan area networks (2.6), Linux (3.2) and Voice over Internet Protocol (3.4).

The report forecasted a 12% growth in corporate IT spending on storage this year, a 5.8% growth in software and a 3.6% growth in IT staffing. Servers and communications equipment will see a growth of 1.8% and 0.5% respectively in 2002.

Spending on IT services is predicted to decline by 3% and on PCs by 1.5%, according to the report. Just 32% of the respondents indicated that 2002 would see substantial spending on PC upgrades at their companies.

IT vendors face a tough year, according to the report, with users expecting competition among hungry suppliers to keep prices down.

However, the survey did expect IBM, Microsoft, Dell Computer and Cisco Systems to increase their order books in 2002.

IBM was given positive comments for its "aggressive" attitude, service orientation and product breadth while Microsoft was highlighted for its desktop presence and "less expensive database". Dell is now seen as the "most stable PC vendor," while Sun Microsystems replaced Hewlett-Packard as having the best server products, the report said.

HP and Compaq were both criticised in the survey. HP was singled out for poor hardware quality and "confusion" while Compaq was attacked for "lack of confidence".

Nevertheless, when respondents were asked to give a plus, neutral or minus rating as to the likelihood of their company spending money with each vendor, HP received an overall +15 while Compaq received a +31.

"Compaq and HP do better than previous answers would lead one to believe. HP has a rejuvenated enterprise line. We don't know why Compaq rates this well, perhaps because of PC upgrades," a spokesperson for Merrill Lynch said.

On the plus side, Microsoft received an overall +88, Cisco +43, IBM +30, Oracle +15 and Sun an overall neutral rating of 0.

On the negative side, Siebel Systems got an overall rating of -38, Storage Area Networks (SAN) vendor Brocade Communications Systems -36, Computer Associates -29, server software vendor BEA Systems -28 and storage giant EMC -13.

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