Slower Going for IT Spending - But the Recovery Continues

Last quarter we saw corporate IT spending in the process of rapidly stabilizing. Our latest ChangeWave survey shows the rate of recovery is slower this quarter – but on the positive side, things are still continuing to improve and there are signs of a bigger uptick in store for 1st Half 2010.

The ChangeWave survey was conducted August 10-19, and 1,801 respondents involved with IT spending in their organization participated.

Looking ahead, 18% of respondents said their company’s IT spending will increase for the fourth quarter – a three point improvement since our May survey.

However, one-in-four respondents (25%) said that their company’s IT spending will decrease (or there will be no spending at all) – which is one point worse than previously.

We also asked respondents if their IT spending was on track thus far in the third quarter, and our findings show only a very slight change since the previous survey.

Thirty-two percent said they’ve spent Less than Planned so far in the third quarter, and 11% say they’ve spent More than Planned – altogether a net one point improvement.

1st Half 2010

On a more positive note, when we look ahead to first half 2010, we see more bullish signs. One-in-four (24%) said they think their company’s first half 2010 budget will be greater than second half 2009, a 4-point improvement since the previous survey.

Only 19% said they think their company’s IT budget will be less than second half 2009 – also 4-points improved. We note that this is the most optimistic longer-term outlook we’ve seen in two years.

Individual IT Categories. Out of the 13 IT categories we looked at in this survey, Networking (Change in Net Difference Score = +3) registered the biggest increase since the previous quarter. Application Development Software/Tools (+2) and Storage (+1) are also showing some signs of momentum.

In the same survey we also focused on corporate smart phone buying. Going forward, 35% of respondents report their company plans to buy smart phones next quarter – down 1-point from previously.

In terms of manufacturers, Research in Motion (RIMM; 74%) is set to maintain its dominant share of planned corporate buying.

Apple (APPL; 27%) remains in second place, up 1-point from previously.

Of course, most of Apple’s corporate share is among small- to medium-sized companies (under 1,000 Employees), while RIM’s corporate share is heavily concentrated among larger companies (over 1,000 Employees).

Palm (PALM; 7%) is also registering a 1-pt uptick in planned purchases – likely attributable to its recent launch of the Palm Pre.

Bottom Line

Nearly all signs point to a slowdown in the rate of recovery for corporate IT spending this quarter. But on the positive side, spending is still continuing to improve and there are signs of a bigger uptick in store for first half 2010.

In terms of specific vendors, Microsoft (MSFT; +2) and Dell (DELL; +2) are showing signs of momentum going forward – possibly related to the impending release of Windows 7.

Jean Crumrine co-wrote this article

Comments

[brewer:]

IT has no products to buy because they only buy Microsoft trash to protect their own jobs. Microsoft has gotten so lazy that they only manage to released warmed over rehashed bloatware every decade or so, and even that is not up to any standard anymore. Vista 2.0 (aka Windows '7') isn't going to see much in the way of IT adoption, either, by their own admission.

The mentality of Microsoft is 'good enough'. But if all the windows users think XP is 'good enough' then that is a problem. No innovation whatsoever. IT doesn't want to do any actual work anyhow, neither does Microsoft, so it's a match made in heaven, really.

Sep 18 03:09 PM

[Todd Campbell:]

Interesting post. Will be important to watch given its affect on restocking..re. the low levels of inventory on hand.

Sep 18 03:49 PM

[Midwest guy:]

I.T Investing will be a boom to smart grid Development down the road'the only question I have is( will the contracts be given to the big boys and then farmed out over sea).
Do you see smaller emerging desigers stepping up?

I am in somewhat agreement With brewer,(mic-row sort)
is fat and lazy

Sep 18 04:05 PM

[MartyT:]

I think IT is a super thin market.

I think the world has absolutely consumed its IT resources and has failed to invest in creating new IT resources. I used to meet brilliant Indian and Chinese IT professionals, but all of the new ones I have met are not good programmers and will NEVER be good programmers. They try hard, but it's just not in the cards for them.

The skills that it takes to make someone a skilled IT person aren't very useful for survival in hunter-gatherer environments or in most social environments so those skills have not been genetically selected for reproduction. It's a rare skill.

Even if one has been born with the skills they have to have the background experience. Most really great programmers I have ever known have had two things. Access to programmable computers at a young age (13 is good), access to programming knowledge (books or magazines), and lots and lots of free time. I have known a lot of AWESOME Irish contractors... my guess is that has something to do with the weather.

So to have a truly talented programmer you need someone with the natural skill, access to programmable computers at a young age, access to the knowledge, and lots of free time. That my friends is a rare bird. You will find that most professional programmers are FAKERS and are not productive and likely do more damage than good (OK I am a little bitter).

If you are still reading then thank you... I do ramble on this subject. My point is that all of the talented programmers that I know are doing fine right now and newly minted talented programmers with any interested in working for a corporation are very rare. But if demand increases for programmers the wages will spike up quickly. Then a lot of FAKERS will fill the extra demand. Unfortunately, the FAKERS won't/can't deliver.

The reason companies will deal with all of these problems is because a single programmer can increase productivity of a company geometrically. The companies that can somehow find and motivate good IT professionals will dominate. Figuring out which pros are good and which ones are posing and keeping the good ones happy is very very hard.

Sep 18 10:50 PM

[ebworthen:]

The University where I work had a flush of spending in May and June because stimulus money came in and had to be spent before the end of the quarter (June). Budget cuts and a furlough came down in Februray/March, but stimulus money came in shortly after and it was "spend, spend, spend" even on un-needed I.T. equipment.

This next fiscal year is projected to have a much bigger deficit with no stimulus and a longer furlough.

The result will be less I.T. spending by State and Local government agencies, and with higher unemployment and more furloughs, fewer individual purchases.

Don't bank on a "cash for clunkers" or $8,000 tax credit to save the auto industry, home industry, or for the now spent stimulus at the state level to continue the blip evidenced in your report.

A 55% pop in the markets in six months on low volume and government spending and increasing unemployment does not a long term I.T. recovery environment make

Sep 19 02:27 PM

[Dave Wrixon:]

Yes, and unfortunately this represents the cutting edge of American Industry. Pretty sad when you think about it. It is only a matter of time before the Chinese bring out their own OS and then start offering it in English and other languages.


On Sep 18 03:09 PM brewer wrote:

> IT has no products to buy because they only buy Microsoft trash to
> protect their own jobs. Microsoft has gotten so lazy that they
> only manage to released warmed over rehashed bloatware every decade
> or so, and even that is not up to any standard anymore. Vista
> 2.0 (aka Windows '7') isn't going to see much in the way of IT adoption,
> either, by their own admission.
>
> The mentality of Microsoft is 'good enough'. But if all the windows
> users think XP is 'good enough' then that is a problem. No innovation
> whatsoever. IT doesn't want to do any actual work anyhow, neither
> does Microsoft, so it's a match made in heaven, really.

Sep 20 06:50 AM

[Michael Clark:]

I love the term 'rapidly stabilizing'. That actually is almost a surrender from the 'hall full' glass crowd. 'Rapidly stabilizing' last month; 'less rapidly stabilizing' this month.

Sep 20 08:17 AM

[Michael Clark:]

That sounds familiar. Not exactly 'infrastructure' is it. We have bridges collapsing and we're sending money to universities to buy computers they don't need. Maybe that money should have went in to tuition reductions for students instead.


On Sep 19 02:27 PM ebworthen wrote:

> The University where I work had a flush of spending in May and June
> because stimulus money came in and had to be spent before the end
> of the quarter (June). Budget cuts and a furlough came down in Februray/March,
> but stimulus money came in shortly after and it was "spend, spend,
> spend" even on un-needed I.T. equipment.
>
> This next fiscal year is projected to have a much bigger deficit
> with no stimulus and a longer furlough.
>
> The result will be less I.T. spending by State and Local government
> agencies, and with higher unemployment and more furloughs, fewer
> individual purchases.
>
> Don't bank on a "cash for clunkers" or $8,000 tax credit to save
> the auto industry, home industry, or for the now spent stimulus at
> the state level to continue the blip evidenced in your report.<br/>
>
> A 55% pop in the markets in six months on low volume and government
> spending and increasing unemployment does not a long term I.T. recovery
> environment make

Sep 20 10:24 AM

[TeresaE:]

Small companies used to be huge consumers.

I don't know any that can afford to replace fried computers, let alone perform a full network upgrage.

No credit, no customers does not equate to more IT spending. Oh wait, the government seems to think it does.

As for Microsoft, I have noticed that more and more new computers are being sold with an "upgrade" to XP. Wow, talk about creating products consumers want.

Sep 20 10:32 AM

[ebworthen:]

I agree with you.

Instead, tuition will be raised next year, and Faculty/Staff are being asked to do more with less, increased class sizes, and longer furloughs. It's better than losing your job, but people (students included) are more important than equipment.


On Sep 20 10:24 AM Michael Clark wrote:

> That sounds familiar. Not exactly 'infrastructure' is it. We have
> bridges collapsing and we're sending money to universities to buy
> computers they don't need. Maybe that money should have went in to
> tuition reductions for students instead.

Sep 20 01:17 PM

[ebworthen:]

When you had to program in order to play on the computer there was an incentive to learn.

Now, you can play on the computer or game console w/out programming knowledge. How much fun is C++ when your buddies are playing Halo 3? Yawn.

Newer programmers are cut and paste and use templates and plug in's and app's versus learning what underpins that second layer.

Similar to what happened to film and animation when computers took over the special effects and editing, not nearly as much thought had to go into it.


On Sep 18 10:50 PM MartyT wrote:

> I think IT is a super thin market.
>
> I think the world has absolutely consumed its IT resources and has
> failed to invest in creating new IT resources. I used to meet brilliant
> Indian and Chinese IT professionals, but all of the new ones I have
> met are not good programmers and will NEVER be good programmers.
> They try hard, but it's just not in the cards for them.
>
> The skills that it takes to make someone a skilled IT person aren't
> very useful for survival in hunter-gatherer environments or in most
> social environments so those skills have not been genetically selected
> for reproduction. It's a rare skill.
>
> Even if one has been born with the skills they have to have the background
> experience. Most really great programmers I have ever known have
> had two things. Access to programmable computers at a young age (13
> is good), access to programming knowledge (books or magazines), and
> lots and lots of free time. I have known a lot of AWESOME Irish contractors...
> my guess is that has something to do with the weather.
>
> So to have a truly talented programmer you need someone with the
> natural skill, access to programmable computers at a young age, access
> to the knowledge, and lots of free time. That my friends is a rare
> bird. You will find that most professional programmers are FAKERS
> and are not productive and likely do more damage than good (OK I
> am a little bitter).
>
> If you are still reading then thank you... I do ramble on this subject.
> My point is that all of the talented programmers that I know are
> doing fine right now and newly minted talented programmers with any
> interested in working for a corporation are very rare. But if demand
> increases for programmers the wages will spike up quickly. Then a
> lot of FAKERS will fill the extra demand. Unfortunately, the FAKERS
> won't/can't deliver.
>
> The reason companies will deal with all of these problems is because
> a single programmer can increase productivity of a company geometrically.
> The companies that can somehow find and motivate good IT professionals
> will dominate. Figuring out which pros are good and which ones are
> posing and keeping the good ones happy is very very hard.

Sep 20 01:22 PM

[sellside_pov:]

agree


On Sep 18 10:50 PM MartyT wrote:

> I think IT is a super thin market.
>
> I think the world has absolutely consumed its IT resources and has
> failed to invest in creating new IT resources. I used to meet brilliant
> Indian and Chinese IT professionals, but all of the new ones I have
> met are not good programmers and will NEVER be good programmers.
> They try hard, but it's just not in the cards for them.
>
> The skills that it takes to make someone a skilled IT person aren't
> very useful for survival in hunter-gatherer environments or in most
> social environments so those skills have not been genetically selected
> for reproduction. It's a rare skill.
>
> Even if one has been born with the skills they have to have the background
> experience. Most really great programmers I have ever known have
> had two things. Access to programmable computers at a young age
> (13 is good), access to programming knowledge (books or magazines),
> and lots and lots of free time. I have known a lot of AWESOME Irish
> contractors... my guess is that has something to do with the weather.
>
>
> So to have a truly talented programmer you need someone with the
> natural skill, access to programmable computers at a young age, access
> to the knowledge, and lots of free time. That my friends is a rare
> bird. You will find that most professional programmers are FAKERS
> and are not productive and likely do more damage than good (OK I
> am a little bitter).
>
> If you are still reading then thank you... I do ramble on this subject.
> My point is that all of the talented programmers that I know are
> doing fine right now and newly minted talented programmers with any
> interested in working for a corporation are very rare. But if demand
> increases for programmers the wages will spike up quickly. Then
> a lot of FAKERS will fill the extra demand. Unfortunately, the FAKERS
> won't/can't deliver.
>
> The reason companies will deal with all of these problems is because
> a single programmer can increase productivity of a company geometrically.
> The companies that can somehow find and motivate good IT professionals
> will dominate. Figuring out which pros are good and which ones are
> posing and keeping the good ones happy is very very hard.

Sep 20 01:34 PM

[Graham and ...:]

Computers are somewhat less costly than "bricks and mortar" capex, but if there is no additional customer demand, there's no real need to get new computers either. The old ones will do fine, for some years anyway.

Sep 20 01:57 PM

[Michael Clark:]

I worked at the University of Oregon for 30 years. In the thirty years I worked there, tuition went up an astounding amount.

From 1976 to 2007, University of Oregon full-time tuition for undergraduate residents of Oregon climbed from $216 per term to $2107. This is an increase in thirty years of 875%.
In the same time, full-time tuition for non-resident graduate students increased from $320 per term to $5447 per term, an increase of 1602%.
To put this in perspective, a person earning $20,000 per year in 1976 (a reasonable salary at the time), would need to be making $320,400 in 2007 in order to keep up with this suggested inflationary rate.
A person earning $60,000 in 1976 (a higher administration type salary), would need to be making $961,200 in 2007 in order to be keeping up with this inflationary rate.


On Sep 20 01:17 PM ebworthen wrote:

> I agree with you.
>
> Instead, tuition will be raised next year, and Faculty/Staff are
> being asked to do more with less, increased class sizes, and longer
> furloughs. It's better than losing your job, but people (students
> included) are more important than equipment.

Sep 20 03:39 PM