IT Spending Coughs & Splutters

Server spending may be on the up, but CIOs are hardly splashing money around like lottery winners, according to industry analysts.

This morning IDC painted a rosy picture in its latest report on the state of the server market. Factory revenues grew to $11.5 billion in the third quarter of 2004, marking the sixth consecutive quarter of revenue growth, according to the research company (see IDC Sees Growth in Linux, Blade Servers).

But that doesnt mean CIOs are emptying their wallets with wild abandon. A recent IT spending report from Goldman Sachs & Co. presented a much more sober outlook. Its survey of about 100 IT managers concluded that, for the second year, overall spending growth is stuck in the low single digits.

Goldman Sachs reckons spending on new hardware and software will grow at an "unexciting" 3.4 percent in 2004, though this is, at least, way better than the decidedly depressing forecast of 0.4 percent reported back in August.

Clearly, the IT industry is taking its time to emerge from the doldrums. This is hardly surprising: Users, having survived the economic downturn, are being extremely cautious with their capital expenditure (see Are We out of the Woods Yet?).But some technology areas will be hotter than others over the coming months, according to the Goldman analysts. They say enterprise demand for low-end storage hardware is growing, suggesting that the technology is breaking out of its traditional SMB (small and medium-sized business) niche. With companies shifting their older and less critical data on to cheaper storage mediums, this is driving the popularity of low-end storage arrays.

Another growing storage area is disk-based backup. The Goldman report found that more than two-thirds of respondents are planning to deploy disk-based backup in the coming year, with the rest expected to follow.

Some industry sectors are also promising to be more positive than others in 2005. Earlier this week, analyst firm Datamonitor reported that American insurance firms are currently planning a major technology overhaul, with 2005 spending set to be $750 million higher than in 2004 (see North American Insurers to Up Spending).

Some of the major vendors have already latched on to this trend. Yesterday, for example, IBM Corp. (NYSE: IBM) snapped up Liberty Insurance Services for an undisclosed fee in an attempt to tap into this market (see IBM Acquires Liberty Insurance Services).

When the deal is completed, the new IBM subsidiary will handle life and annuity policy processing for more than a dozen life insurance companies worldwide, according to the hardware giant.— James Rogers, Site Editor, Next-Gen Data Center Forum