IT spend outlook down on macro uncertainty

LONDON, UK: Companies in the United States and Europe expect to spend less on information technology than they did three months ago due to economic uncertainty in the euro zone and public spending cuts, according to a UBS survey.

The quarterly poll of 100 chief information officers (CIOs) found IT budgets were expected to fall 1.3 percent on average over the next 12 months. In UBS's last poll, the expectation was for IT spending to rise by 0.5 percent.

Pessimism was most pronounced in the public sector, which accounts for 19 percent of IT spending globally, where CIOs expected their budgets to decline by 4.9 percent in the next 12 months, according to the survey published on Thursday.

More than a third of respondents said they had seen project delays, cancellations or plans to lower spending due to the euro zone crisis, with 38 percent of European CIOs and 35 percent of U.S. CIOs answering in the affirmative.

Servers and storage remained top priorities, as companies grapple with exponentially increasing amounts of data, and in general companies were seen shifting to tier-one vendors with multiple IT offerings.

UBS saw storage market leaders EMC and NetApp particularly benefiting from this trend.

In networking, respondents preferred Cisco and Juniper to Hewlett-Packard, and a new venture between Cisco and EMC's virtualisation-software unit VMware was favoured for data-centre upgrades.

Personal computers, considered by many as overdue for a refresh cycle, were more likely to be upgraded next year than this year. Most CIOs also expected to move to Microsoft's Windows 7 operating system in 2011.

In general, Microsoft was seen as the biggest beneficiary of any increase in spending on software, followed by virtualisation specialists VMware and Citrix, whose software allows single servers or PCs to do the work of many.

In IT services, the CIOs said they preferred tier-one names that offered multiple services such as HP and IBM, and also said technical skills were more important than price.

The biggest round of price cuts was likely over, UBS said, adding it expected upward pressure on pricing for offshore IT services because of wage inflation in countries like India.

Demand for consulting services that provided a quick return on investment and helped companies cut costs or retain customers remained resilient, while larger, transformational deals were seen as rare.

UBS surveyed 60 CIOs in the United States, 14 in Britain, 13 in France and 13 in Germany during the past six weeks. A quarter of the companies surveyed had annual sales of more than $5 billion and 62 percent had sales of $1 billion or more.