28 October 2002 Nearly one third of CIOs expect to increase IT spending from mid-2003, according to survey of CIOs in the UK and US by investment bank Merrill Lynch.
Only 4% of CIOs suggest that spending will increase in the fourth quarter, although nearly a fifth are anticipating a loosening of purse strings during the first quarter of 2003. However, Merrill itself doubted that a meaningful recovery will occur until 2004.
CIOs cited a number of factors for a probable upturn in mid-2003. These include the need to replace ageing equipment and an increasing backlog of user requests.
The survey also highlighted CIO’s changing perceptions of large technology vendors. Two-thirds said software giant Microsoft was becoming more important to them. Merrill said this was due to Microsoft’s new licensing agreements, users standardizing on Microsoft applications and upgrades to Windows XP. Only 16% of CIOs said Microsoft was becoming less important to their organisations.
In contrast, a greater number of CIOs stated that other major technology suppliers, including Hewlett-Packard (HP), Cisco Systems, Sun Microsystems, EMC and SAP, are becoming less important to them. More than one-third said storage giant EMC was less important, while a similar number offered the same opinion about systems giant HP. “Users are not sure the merger [with Compaq] differentiates HP or don’t consider HP their standard platform,” the report stated.
Meanwhile, Merrill cited the need for heavy spending on maintenance as a key reason why budgets had not fallen further than they had during the downturn. “Studies show that about 80% of spending is maintenance, which is why budgets do not fall between 10% and 20% during difficult times.
As a result, many companies are trying to negotiate down their software maintenance fees. This is a problem for software vendors that are heavily reliant on this revenue stream, especially during a downturn when they typically struggle to sell new software licences.