Corporate IT spending will slow to between 4 percent and 6 percent growth this year, compared with 7 percent to 9 percent in recent years, according to 75 senior IT executives and CIOs polled by financial firm Morgan Stanley Dean Witter Co. Also, 75 percent of the respondents, most of whom represent Fortune 500 companies, said they have not modified their budgets because of economic conditions or market turmoil.
In announcing the results of the survey, Morgan Stanley assured investors that only 32 percent of IT organizations would “front end” their budgets this year – that is, do most of their spending in the first two quarters. This number is “significant but less than the market feared,” according to George Kelly, Morgan Stanley managing director and data networking analyst.
It also surfaced that IT executives are doing their darnedest to bring Y2K expenditures under control: Two-thirds (66 percent) of the respondents said Y2K issues accounted for less than 10 percent of their 1999 budgets. And only one in eight (13 percent) said that line item would account for more than one-third of their budgets in 1999, down from 23 percent in 1998.
But that doesn’t mean Y2K is becoming a non-issue. Close to one-third of the respondents (31 percent) stated that they had deferred new projects because of Y2K issues (which, according to Morgan Stanley, suggests there may be a rebound in new applications development in late 1999 or early 2000). And 57 percent of the respondents said they had a post-Y2K project backlog to address. The apparent discontinuity may be explained by the fact that 74 percent said they will increase spending on less expensive, off-the-shelf applications.
The survey also uncovered a number of purchasing trends in specific technology sectors: respondents stated that IBM Corp., Compaq Computer Corp. and Hewlett-Packard Co. would receive the lion’s share of the hardware business transacted in 1999. In addition, the mainframe appears to be alive and well – more than half of the respondents indicated that that’s where they store 60 percent or more of their mission-critical applications and data. Some 71 percent of the IT execs stated that they’re consolidating their networking purchasing through one vendor, and one-fifth said they expect to deploy voice-over-IP networks sometime in `99.