Gartner: Renegotiate contracts with more favourable terms

Overcapacity in the IT market has created a buyers' market and chief information officers must act now to renegotiate contracts...

Overcapacity in the IT market has created a buyers' market and chief information officers must act now to renegotiate contracts under more favourable terms "from extremely anxious vendors".

That was the message of Gartner's chief executive officer Michael Fleisher during his keynote speech at the company's Symposium/ITxpo in Florida.

"You have the incredible good fortune to be in what is, quite simply, the best market ever for technology buyers," Fleisher said. "Overcapacity in the industry is giving you the perfect opportunity to lock in great new terms."

Users should act now because present pricing levels "will definitely disappear in the next 12 to 24 months", he said.

"Your success over the next couple of years will be determined by how well you take advantage of this opportunity over the next 12 months," Fleisher said.

This is bad news for IT vendors, who continue to face falling prices, sagging demand, industry consolidation and excess capacity, he noted.

There is no prospect for a broad-based recovery in the IT industry next year, Fleisher said, reiterating his prediction made at this event last year that half of well-known IT vendors will disappear, either through bankruptcy or acquisition, by 2004.

IT spending is expected to increase only 3.4% in 2002 over 2001 and growth in IT spending is expected to improve to 7% in 2003 over 2002, according to Gartner's Dataquest unit.

But even this lags behind the 25% annual growth rates seen during the 1990s. "The technology industry must change and accept growth rates in the range of 10% a year," he said. "Reality and not wishful thinking must drive the behaviour of vendors who hope to prosper in this environment."

In order to sell their wares, vendors must prove with concrete measurements to chief information officers that their products can generate business value.

The chief information officers need to understand how technology can drive revenues is also increasing, because more and more chief information officers are reporting directly to the chief executive officers of their companies. Almost half of chief information officers surveyed recently by Gartner now report to chief executive officers, and more than 80% expect to do so by 2005, Fleisher said.

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