Again, Goldman Sachs Lowers Outlook For IT Spending

Based on the sixth of its series of IT Spending Surveys, estimates by Wall Street are still way too optimistic. The survey, based on a panel made up of 100 IT managers with decision-making authority at multinational Fortune 1000 companies, finds that the suggested growth in spending will be only 2 to 3 percent. In its July survey, Goldman Sachs had lowered an earlier forecast to a 3 to 5 percent increase in spending.

"As an IT spending recovery should lag a broader economic recovery, we should not expect to see more normal IT spending until 2004," analysts Laura Conigliaro and Rick Sherlund wrote. The result, the report said, is that Wall Street estimates of 9 percent revenue growth for IT vendors next year will ultimately be lowered. According to the Goldman Sachs survey, an average growth in spending is only 2 to 3 percent.

Longer-term spending will be around 6 to 7 percent, still depressed over the historical 10 to 13 percent norm. However there is some good news--50 percent said spending will increase next year, up from 16 percent earlier making that claim. Other encouraging news is that fewer respondents to the current survey expect to under-spend their budgets for the remainder of the year. In July, 35 percent said they would spend out their remaining budget and this month 39 percent said they will do so. Furthermore, 10 percent said they will overspend their budget, up from 4 percent two months ago.

IT managers have not shifted their priorities, however. Still slated to see the most near-term growth is security software and hardware, networking gear, wireless LAN equipment, storage software (including backup and remote mirroring), mid-range storage arrays and Windows 2000/XP desktop software.

Those technologies that will see the least spending increases in the next year include mainframes, supply chain management software, system integration services, videoconferencing systems and Unix and NT servers.

The findings seemed pretty much in keeping with what Chris Davey, senior vice president at systems integrator Sapient has been hearing from his clients. "There's still a lot of uncertainty about the economy and the prospects for war in the Middle East," Davey said. "There's a lot of trepidation right now."