Goldman Sachs has bad news for most of the IT economy: IT spending will slip from 7 percent growth to 5 percent growth in 2008. While not yet recessionary, the outlook is dipping dangerously close to that.
Expectations of budget growth remain down significantly on a year-over-year basis, with many CIOs limiting their purchases to projects with a high and fast ROI. We continue to believe that 2008 IT spending will decelerate to 5 percent from 7 percent in 2007. Demand for discretionary IT projects dropped to its lowest point in the history of the survey, with caution beginning to spread to the offshore providers.
CIOs have emphasized to us that they are buying on a need versus want basis, are often downsizing deals to fit with current budget constraints. In fact, contrary to general tightening in spending, purchases with an especially compelling ROI are being accelerated in the current environment.
But not everyone is going to get pummeled. In terms of spending priorities for 2008-09, server virtualization and server consolidation were ranked No. 1 and No. 2, respectively, with cost cutting hitting No. 3 and grid computing and on-demand computing rounding out the very bottom of the list.
On the cost-cutting front, drilling into the data yields an important metric: 10 percent of respondents are going beyond trying to slim down licensing costs to cut software maintenance. Given that more and more revenue for Oracle and others is from maintenance, this is cause for alarm.
Several categories of IT spending - ERP software and database software, most particularly - have slipped in priority since Goldman Sachs' report in 2007. Microsoft's Vista spending? It remains in the gutter.
More information on the service and support industry can be found at http://www.supportindustry.com/
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