IT Spending Suffers Hangover

Unhappy New Year. That's the upshot of Goldman Sachs & Co.'s most recent survey of IT managers, which shows a further deterioration in corporate America's outlook for technology spending in 2003. However, amid the mostly dreary forecast, storage networking remains one of the bright spots.

Goldman's survey found an average 1 percent decline in overall spending for 2003 among respondents -- compared with 2 to 3 percent growth on its previous surveys. The firm surveyed a panel of 100 IT managers at Fortune 1000 companies from December 9 to 20 (see Survey: IT Spending Still Hideous).

"IT managers came out of budgeting season with a significantly more negative outlook on 2003," write Goldman Sachs analysts Laura Conigliaro and Rick Sherlund, in a report released today. "With faltering end demand, an absence of 'game-changing' technologies, and little pent-up demand, we do not currently see catalysts to propel IT spending in early 2003."

IT managers who anticipate lower spending in 2003 increased to 37 percent on the December survey, compared with 23 percent on Goldman's October survey and 16 percent on its August survey.

Figure 1: How do you expect your overall 2003 IT spending to be relative to 2002?

In response to the question, "Heading into early 2003, which do you consider more likely?", about two-thirds of the respondents (67 percent) said they expect "incremental IT budget tightening by management." The largest number of those surveyed (43 percent) said they didn't expect to see an acceleration in IT spending until 2004 or later.

Still, storage networking remains a priority category for IT managers, according to the Goldman survey results. "Although storage networking may lack the hyper-growth of prior expectations, the growth profile remains strong," the firm's analysts write.

More than a third (35 percent) of those surveyed currently have no networked storage at all. On average, the survey respondents expect to increase SAN adoption to comprise 42 percent of all storage by the end of 2004, up from 18 percent today.

Specifically, storage networking components -- host bus adapters and switches -- still rank among the highest priorities for IT managers in 2003. NAS also held steady as a "medium priority," while storage software fell from the highest tier of priorities to a mid-level one. "Fading urgency around disaster-recovery initiatives post-9/11 may be affecting mindshare for storage software," according to the report.

Besides storage networking, other top IT spending priorities include Gigabit Ethernet, security, wireless LANs, and Web-based application infrastructure.Other analysts have noted that the overall storage market will continue to slip into the new year. According to IDC's year-end projections, revenues in the external disk storage market will drop 3.7 percent in 2003 to $12.8 billion, with 2004 sales inching up around 1 percent to $13.0 billion (see Storage Sales Fall 24% in 2002).

Todd Spangler, US Editor, Byte and Switch
http://www.byteandswitch.com