IT spending to increase little in large companies

Large multinational companies will increase their IT spending minimally in 2003, according to a recent survey conducted by the research unit of The Goldman Sachs Group Inc. investment bank.

The survey, which polled 100 chief information officers (CIOs) of U.S.-based multinationals in August, also found much dislike among respondents for Microsoft Corp.'s controversial new licensing plan. And for all the fanfare that came out of Hewlett-Packard Co. after closing its Compaq acquisition, the survey found that HP is losing server and storage business among respondents.

But news is bad for IT vendors in general. IT spending will increase overall only between 2 percent and 3 percent in 2003 compared with 2002, below an earlier Goldman Sachs projection of 3 percent to 5 percent growth, the survey said.

Fifty percent of respondents plan to spend more on IT in 2003 than in 2002, while 34 percent plan to spend about the same, and the remaining 16 percent expect to spend less, according to the survey, which was released last week.

IT spending will not regain its normal year-on-year growth rate of between 6 percent and 7 percent until at least 2004, according to the survey. Moreover, what respondents are calling a "normal" rate of year-on year increase in IT spending is itself about half of what it used to be historically, according to the survey.

As IT managers get stingy with their IT dollars, most respondents (68 percent) reported an increase in their ability to command favorable pricing from their vendors.

Still, even with the projected small growth, 2003 stands to be better than 2002, which on average will see a 1 percent decline in IT spending over last year, according to the survey. About half of the respondents expect to end 2002 having spent less than is allotted in their budget, while the other half expects to either spend according to plan or spend more, the survey said.

Thirty-seven percent of respondents said they signed up with Microsoft's new licensing program and were unhappy with it, while another 16 percent reported signing up and feeling neutral about it. Seven percent who signed up were happy with the program. The remaining 40 percent of respondents had either not signed up or didn't answer the question.

Server providers gaining share of respondents' IT budgets are led by Dell Computer Corp. and IBM Corp., while HP is losing ground, according to the survey. Forty-three percent of respondents said they are spending a larger share of their total IT budget on Dell's products than they did previously, while 28 percent of respondents said they are spending less on HP products.

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