The Ever Deepening Mystery of IT Spending Projections

Here is something I’ve wanted to do for a long long time: compare the various projections on IT spending made by the idiots in the IT analyst community. I’ve had Google sending me updates on the subject for some time, and I find myself asking the same question that the great band, Chicago, once asked: “Does anyone really know what time it is?”

Today:

Miami Herald – FL,USA
… released by the Hewlett-Packard Co., 81 percent of 399 small businesses polled in March said they planned to increase their technology spending an average 68 …

I guess SMBs are going to buy dumbed down FC SANs though they have no apps that require them…

Rutland Herald – Rutland,VT,USA
In spite of potential economic roadblocks, CFOs expect their firms to continue to invest in the areas of capital equipment and technology. They indicate that spending on plant and equipment will increase by 12.9 percent over the next twelve months and technology spending will grow by an average of 8.5 percent.

8.5 percent, huh?

IT spending to grow 6.0 percent till 2009
Hindu – Chennai,India
New Delhi, May. 8 (PTI): Global IT spending is expected to grow at the compounded annual growth rate of six percent over the next four years with markets like India showing the highest growth possibilities, research firm IDC, has said. “The global IT market will expand at a compound annual growth rate of 6.0 percent between 2005 and 2009,” said Juan Orozco, Research Manager, Worldwide IT Markets. In Japan, IT spending will increase by 1.0 percent while US technology spending is expected to grow by 5.0 percent.

Oh, now its five percent…

IT spending could level off, report predicts
GovExec.com – USA, May 4
The years of large annual increases in information technology spending by government agencies could be coming to an end, according to a new report. The report, issued by Reston, Va.-based IT market research firm INPUT, projects that government technology expenditures will grow to $92 billion in fiscal 2010, up from $71 billion in fiscal 2005. The annual rate of growth in those figures is lower than increases in recent years. Agencies will spend about $23.5 billion on computer systems in 2010, up from $17.8 billion in fiscal 2005.

Government’s no help…except for all the regulations…

United Business Media PR Newswire
FRAMINGHAM, Mass., May 2 /PRNewswire/ — The CIO Magazine Tech Poll(TM) results for April, show strong signs of growth in projected information technology (IT) spending. For the third consecutive month, chief information officers (CIOs) predict increasing spending projections. In this month’s poll, respondents predict spending growth of 7.9% during the next 12 months, compared with last month’s 6.4%. Respondents also predict growth in spending for security software, application software, infrastructure software, telecom equipment and data networking equipment. In the April poll’s special question, a majority of CIOs (61.2 %) report they consider their own IT infrastructure to be solid and a strong differentiator. Slightly more than 18% (18.1%) rate their infrastructure as average, meaning they are just getting by. The remaining respondents view their IT infrastructure as both brittle and a potential corporate risk (9.6%), or outdated and a significant corporate risk (4.8%) “The continued projected growth of IT spending is a positive sign that technology spending continues on a solid growth path,” says Gary Beach, Group Publisher of CXO Media, the company that publishes CIO magazine.

I wonder how many CIOs would acknowledge that their infrastructure is brittle, outdated and introduces significant corporate risk…

Wall Street Journal
Mixed Messages
April 27, 2005; Page C1
Even though a slew of technology companies have reported earnings, investors are still justifiably confused over what, exactly, was going on with tech during the first quarter. A number of companies whiffed, posting results that fell short of expectations. International Business Machines, whose poor report two weeks ago sparked worries that tech spending tailed off badly at the end of the quarter, is the main culprit. But there also was Sun Microsystems, BMC Software and Siebel Systems. Yesterday, investors saw printer-maker Lexmark International’s disappointing earnings as an indication that demand for personal computers may be slowing. But tech results from the first quarter haven’t been all bad. Intel’s sales and earnings came in well above expectations, and Google shined. Juniper Networks and Motorola also posted good results. Sanford Bernstein strategist Vadim Zlotnikov thinks that tech’s mixed bag is due mostly to the economy having slowed from the rapid growth at the beginning of the recovery to a more measured pace. Over the past 25 years, he says, tech sales have posted average first-quarter declines of 7% or so from the busy fourth quarter. By his reckoning, that is exactly what overall tech sales did this time. But average isn’t very satisfying, especially since some companies probably have to be below average to get there. Hence the skittish take on tech shares. Tech bears feel that there is something more severe going on, and that the reason technology companies are reporting mixed results is that not all of them have felt the downturn’s bite yet.

Confusion doesn’t begin to describe it…

Chicago Tribune
Slow year expected for tech spending
April 25, 2005
Newly published Jupiter Research analysis indicates technology spending by small businesses will be relatively flat this year, though technology marketers should target certain segments that are set to ramp up expenditures. The analysis, the first in a series of new Jupiter Research reports called SMB Marketing, surveyed 260 purchase decision-makers at businesses employing fewer than 250 people. Small-business technology spending for those surveyed is flat this year compared with the last. Forty-four percent of the firms earmarked less than $5,000 for technology purchases this year. But small businesses that are under 3 years old plan to increase technology spending in the $5,000 to $24,999 range.

Cheers to the SMEs, who will save tech at $5K per year! Hoorah!

Computerworld
Economic concerns lead to selective IT spending
Some IT execs delay upgrades, new investments as vendors report mixed Q1 results
News Story by Thomas Hoffman
APRIL 22, 2005 (COMPUTERWORLD) – The weak financial results reported for the first quarter by technology vendors such as IBM and Sun Microsystems Inc., suggested that corporate users might be pulling back on their discretionary IT spending. It’s not uncommon for CIOs to pull back on IT spending during the first quarter in case business conditions worsen and CEOs demand technology spending cuts later in the year, said Andrew Bartels, an analyst at Forrester Research Inc. Howard Rubin, an analyst at Gartner Inc., said he has seen increased IT spending by companies this year in areas such as security and storage technologies that are needed to support Sarbanes-Oxley Act compliance initiatives. But that isn’t enough to end the four-year run of sluggish IT spending, he said. With uneven economic growth overall, “companies will be as frugal as they need to be with IT spending,” Rubin said. “It’s not a happy time.”

Wait, Howard, I thought we were seeing happy shiny vendors holding hands…

Australian IT
IBM slide shakes markets
Wei Gu in New York
APRIL 18, 2005
SHARES in IBM sank 8 per cent to a two-year low on Friday, wiping out more than $US10 billion ($13 billion ) in market capitalisation, after the company reported disappointing results that shook confidence in the tech sector. The stock fell $US6.64 to $US77, single-handedly dragging the Dow into negative territory. Big Blue was the worst-performing stock among the Dow 30 companies and the third-largest net loser on the New York Stock Exchange. “The smart money is moving out of technology in general,” said Mark Herskovitz, who manages $US2 billion assets under Dreyfus Premier Technology Growth fund and does not own IBM shares. “People in this environment are looking for reasons to sell.” Hardware companies led the drop. Sun Microsystems fell 8.3 per cent after it missed expectations. Hewlett-Packard fell 3.5 per cent and PC maker Gateway slipped 5.1 per cent. “Technology spending will be flat if not decreasing,” Ian Campbell, chief executive of NucleusResearch which studies investment returns. “The need to upgrade hardware has diminished.”

Those Aussies are such crepe hangers…

Wall Street Beat: Inflation, spending worries nag IT
IDG News Service 3/25/05
Marc Ferranti, IDG News Service, New York Bureau
Pulled down by inflation worries and continued forecasts of relatively anemic, albeit stable, growth in IT spending, technology company share prices slumped this week, as the Nasdaq Composite Index (ticker symbol COMPX) closed for the holiday weekend Thursday at 1991.06, down 0.8 percent for the week and down 8.5 percent for the year. The latest IT spending forecast from Goldman Sachs Inc., released this week, reflected the sobering insights of many other investment and market research firms this year. “The spending environment is perhaps as stable as it has been since the downturn. But spenders seem satisfied to stay at low levels and are showing no signs of acceleration,” said the report, authored by analysts including longtime industry observer Rick Sherlund. IT operating and capital budgets this year will increase 3.6 percent and 2.9 percent, respectively, the report said. The numbers are lower by several percentage points than most similar reports issued earlier this year.

Uh oh. Now we are down to 2 to 3 percent growth…

IT WEEK
March 22, 2005
SMBs Wielding Heavy Enterprise Dollars
By Clint Boulton
UPDATED: Small- and medium-sized businesses (SMBs) accounted for 44 percent of information technology spending in the United States, shelling out $320 billion in 2004, according to Forrester Research. This highlights the desire for companies with fewer employees and smaller budgets to expand. The Cambridge, Mass., research firm expects IT spending in the SMB segment, which usually spans six to 1,000 employees, to grow 8 percent in 2005. Meanwhile, spending by larger enterprises with 1,000 or more workers will rise 6 percent.

So let’s do the math here. 6 to 8 percent growth in $5000 annual IT spend rates. Wow. Barely covers a week’s tuition for my kid at Harvard. And how much money will the big iron guys need to shell out to get the business?

TOP-TECH NEWS
Enterprise I.T. – Where Is the Money Going?
By Elizabeth Millard
March 22, 2005 11:10AM
“The ice age is over,” META Group analyst Howard Rubin told CIO Today. “The uptick in spending isn’t overwhelming, maybe only 3 or 4 percent, but it’s there.” Although overall spending is going up, Rubin noted that companies now are being cautious, having learned a lesson about overspending in the technology boom. By most analyst estimates, there is more of an emphasis on aligning I.T. with business and managing risk in terms of revenue volatility. “In some ways, I.T. is out of tricks,” said Rubin. “They’ve already cut overhead, and done outsourcing . Now they have to think harder about where to put their money, because they’ve squeezed budgets enough.”

It’s all IT’s fault that we overspent on technology during the fat years. It wasn’t the CEO or CFO calling down to the data center and saying, “We need to go ebusiness, regardless of the cost!” That’s what Gartner, IDC and the rest of the gang told them to do…

IT Spending in Mid-Sized Enterprises Will Experience Solid Growth in 2005, Study Says
Thursday March 17, 10:00 am ET
LONDON, ON, March 17 /PRNewswire/ – 51% of mid-sized enterprises project increased IT spending in 2005, according to a recent study by Info-Tech Research Group, a leading technology research firm. This finding contradicts what is generally being reported by mainstream media. Even more surprising is that a full one-third (33%) of mid-sized enterprises are expecting IT spending increases of more than 15% in 2005. Only 16% of enterprises expect that their IT spending will decrease in 2005. The three top industries planning to increase spending are Health Care, Retail/Wholesale and Professional Services. The three top IT product/service priorities are storage, servers and telephony (VoIP).

More fun with numbers.

REUTERS 3/4/2005
Tech CEOs still reluctant to part with cash
By Duncan Martell, Reuters
SAN FRANCISCO — Technology companies flush with cash are reluctant to dispense large dividends to shareholders, preferring instead a mixture of stock buybacks or more modest payouts to investors, executives said this week at the Reuters Technology Summit. “The best use of cash is to mix dividend and share buybacks,” said William McDermott, chief executive of SAP Americas, the U.S. arm of Germany’s SAP, the biggest maker of software that manages and automates business operations such as manufacturing. Executives this week said technology spending growth going forward will likely be on par with the average increase in U.S. gross domestic product — about 3% — rather than the double-digit growth seen during the boom. They said companies were working to better use the computing capacity they already have and are more likely to buy industry-standard computer servers than expensive proprietary systems that were heavily favored during the boom.

I hope that they favor JBODs and white boxes over one-size-fits-most gear from the brand name vendors.

SEARCH CIO
As IT budgets grow, so does CIO tenure
By Jim Rendon, Senior Writer
28 Feb 2005 | SearchCIO.com
Thanks to growing IT budgets and an improving economy, CIOs’ tenures are increasing, according to a survey of 1,400 CIOs by the research firm Gartner Inc. According to the December 2004 survey conducted by Stamford, Conn.-based Gartner, the average CIO tenure is 4.3 years. In addition, those CIOs expect to stay in their current jobs for another five years. That’s a significant change from 2001, when Gartner found that CIOs were only staying in their positions for an average of three years.In an era of increased IT spending, it is also easier for CIOs to do a good job — and retain their jobs, said Tony Treccapelli, managing director of New York-based consultancy Alvarez & Marsal LLC. “In the past, there was not enough budget money and demands were too high,” he said. “Now budgets are less constrained; there is more room for CIOs to add value.”

Companies had better increase spending soon, or their CIOs may leave… Now there’s a business case.

The Times
February 02, 2005
IT failures set back spending
By Rhys Blakely, Times Online
Boardroom arguments over the reliability and value of information technology systems are having a significant impact on British companies’ investment plans. A serious rift between chief executives, who feel systems have failed to deliver, and IT staff, who think boardrooms fail to understand their work, means that less than half of senior executives plan to increase technology budgets this year, according to a survey published this afternoon by the Economist Intelligence Unit. Only 43 per cent of the chief executives questioned plan to boost spending in 2005, compared with 58 per cent last year. The decision to freeze investment appears to stem from a wide-ranging belief in the financial services, consumer goods, construction and retail sectors that IT projects consistently fail to realise the benefits they promise.

The best reason of all to question IT expense: actual Return on Investment.