The Road Ahead: Channel Executives Forecast 2011 IT Spending

2011 IT Spending Outlook

The leaders of some of the top channel companies in the IT industry, interviewed Tuesday at the Raymond James IT Supply Chain Conference in New York, say they are ready for growth in 2011.

The gains may be slightly muted compared to the bigger percentage gains realized this year coming out of the economic downturn, but in general, the executives see spending rising across a wide range of products and services.

Here’s a more detailed at look at what several executives had to say.

Bob Dutkowsky

CEO, Tech Data

"Technology spending is a 4 to 6 percent growth rate for the last 30 years. My guess is it will be 5 percent [in 2011]. A lot of tech companies will have difficult [year-over-year comparisons] because last year [2009] was so bad. Tech Data started to grow again in Q4 last year. But a 5 percent kind of number is smart to plan for. Our strategy is to grow above that."

Roy Vallee

Chairman and CEO, Avnet

"A lot happens in the last couple weeks of December. All I can say is the quarter to date is consistent with what we're expecting. We're seeing normal seasonality. Keep in mind, we've had five consecutive quarters of above seasonal growth. We're reverting to normal as a result of higher [year-over-year comparisons]. Corporate spending on IT remains firm. The weakest region is Europe. What's interesting is that while overall IT spending seems to be reverting to secular growth rates, hardware is projected to grow faster than software in the next three years, with storage expansion one of the drivers."

Rob Williams

Director of Investor Relations, Dell

"We continue to see very strong demand in the commercial segment. Whether it's SMB or public sector or [large enterprise]. It's been consistent for four quarters. We had strong tech refresh cycle in servers last year about this time. We had the [Intel] Nehalem launch that was a tremendous improvement and offered lower costs and energy savings. That followed on with (Nehalem-)EX earlier this year. But there's still a lot to be done. We're about give years into virtualization of servers and we're still not halfway there. We're probably in the 40 percent range [of total servers that are virtualized]. There's a tremendous amount of opportunity there. We continue to see virtualization. Demand continues to grow. Five years ago, the prognostications were that server demand would have tailed off, but that hasn't happened. Probably, we'll return back to a normalized trend over the next several quarters. You can't have 25-30 percent growth forever. I think our best guess is industry, will grow high single digits, low teens.

"On the client side, we're again in an early stage of Windows 7 migration. As of September, Windows 7 had 17 percent of the OS space and that's heavily dominated by the consumer space, which is probably 40 percent. Even though we've had a pretty nice replacement cycle on the hardware side, there's still a lot work on the OS side. Combine that with Office 2010 and Exchange, and there will still be a nice upgrade cycle for the next couple years."

Greg Spierkel

CEO, Ingram Micro

"We're seeing and what see continuing into next year is the commercial side of the equation is still fairly robust. SMB and corporate customers in a number of countries are still growing at a nice rate, a high single digit is the average. Where we're seeing a different trend from the front half of the year that's muted in the back half in Europe is the retail sector has topped out. Certain product categories and vendors are doing quite well in the retail space, but retail is flattening out.

"Consumers are making choices for devices that are more portable and the infrastructure to support those devices is good business for us. We are selling it as quickly as we can to the consumer and commercial markets. We have the two major products of consequence in the marketplace [from Apple and Samsung] and expect more next year as Research in Motion and Hewlett-Packard get something in the market. That will only add to the category, both in consumer as well as commercial."

Kevin Murai

President and CEO of Synnex

"There's a couple of camps out there. Some believe that the real good growth we’ve seen through 2010 is all based on pent-up demand [from the economic recession]. No question a lot of that is true. But we tend to be optimistic in 2011. There's still a lot of gas left in the fuel tank. When you look at low-level penetration server virtualization, some newer technologies around mobility, we believe 2011 will be a little better than what historically seen, historically meaning 2-3 percent above GDP."

Ken Lamneck

CEO, Insight Enterprises

"The 5 to 10 percent range seems to be where we're settling that out to be. Big areas for us are anything that's virtualization. There's such a huge opportunity in the data center. Something like 35 percent [of servers] are virtualized. We see that in the underpinnings of the cloud and there's still a few more years of runway left. Also, anything mobile [will be big]. We see video being huge. One stat I heard last week from a large client was that 47 percent of Internet [bandwidth] in the evenings is Netflix. That means networking infrastructure has to improve. As more and more people go to video [over the Internet] things are going to get slower and slower. The networking space has lots of runway left as the need for bigger and bigger pipes increases."

Frank Khulusi

CEO, PC Mall

"It's widely held that we're in an upgrade cycle for PCs. But infrastructure, networking, data center, those have been put off to an extent as well. They have as much or better growth trajectory [than PCs], especially when you talk about the new data center, the cloud, the ’buy-by-the-drink' consumption of IT going forward. All those are not independent of the PC as more people adopt those types of [buying] mentalities from an IT perspective. There is at least as much leg in those refresh cycles as the PC cycle. And services can be added to them."

Tim McGrath

COO, PC Connection

"[Public sector] has been very challenging. We've continued to grow at the SLED and federal levels, but looking at the outlook, we've seen [IT spending] cuts across the municipal landscape. Education and public safety has been very strong. So far our federal contract vehicles have been strong. We're cautiously optimistic.

"There's been a lot of discussion around tablets. Many of our suppliers have labeled it a disruptive technology. It's not disruptive for us. We see terrific growth for iPad. We are seeing adoption for the enterprise. Many will replace traditional notebooks with tablets. But that will be a transformation, not a disruption."

Bob Hammer

Chairman, President and CEO, CommVault

"[The economy] is improving. Most companies globally are in better shape and are willing to spend money. We have a flywheel moving in our direction, and while there are sovereign debt issues in Europe and other things, we see a steady and accelerating improvement.

"The competitive mix we face is much different than five years ago. We add value on top of hardware and compete in the info management business."

Mike Baur

Chairman and CEO, ScanSource

"We continue to see steady growth and signs of improvement as we move into 2011, not only in our business but also in the willingness of the channel to spend money in anticipation of that growth. Demand for our products continues to grow – especially in Unified Communications and Video Surveillance, plus we are even seeing a resurgence of RFID in the market – and we don't see the commoditization of these products happening any time soon."