Editor’s Note: The following article is reprinted from
Technology spending is stalling as the year wears on and as plans to reduce costs come to the fore, according to Goldman Sachs’ most recent poll of IT decision makers.
Goldman Sachs this week is releasing the findings of its June survey of 100 IT decision makers at Fortune 1000 companies, and the research firm says the results show IT buyers are getting cautious once again. Among the indicators pointing to a spending slowdown are drops in plans for total IT spending and IT capital spending since a more positive April, the financial services firm says.
“A more muted view from our panel contrasts with more positive tech bellwether commentary, leaving us with unanswered questions as to how sustainable recent improvements may be,” the Goldman Sachs report reads.
For instance, the total IT spending index was at 71 in April, and June results put it at 65. The technology capital spending index also dropped in that time period from 68.5 to 62.5, which means survey respondents are tightening their purses again. The indexes Goldman Sachs uses summarize the firm’s detailed survey data on forward spending expectations.
More significant, Goldman Sachs says, is that this year’s June poll revealed spending plans are lower than they were at the same time last year—which could impact IT budgets and planned projects for 2008. And while the firm notes “solid second-quarter reports from tech bellwethers in the U.S.,” the survey results cause uncertainly about how IT buyers will react in the coming months.
“With CFOs so sensitized to changes on the macro front, we wonder to what extent recent dislocation in the credit markets could ultimately affect spending decisions, perhaps impacting the slower September quarter and, more importantly, 2008 budget planning,” the report reads.
On the flip side, 30 percent of IT buyers planning to cut costs see computer hardware, including personal systems, servers and storage as a logical place. Another third plan to reduce costs by cutting third-party professionals services, and close to 20 percent said they saw a good potential for cost reduction in communications and networking equipment.
“The top ranking of computer hardware is likely closely related to the virtualization wave that is enabling IT shops to consolidate servers and increase server utilization,” Goldman Sachs concludes.