US firms ask more bang for the buck

NEW YORK: U.S. companies are trying to do more with flat technology budgets by consolidating vendors, sending back-office operations offshore and relying on less- costly technologies, Merrill Lynch said on Monday.

The Chief Information Officers of McGraw-Hill Cos Inc., Merrill Lynch and Co. Inc., Reebok International Inc. and Solectron Corp. told Merrill analysts that technology spending should be up modestly this year, but the theme is doing more with the same dollars.

"There is no killer application and aggressive vendor pricing allows users to stretch spending dollars," Steven Milunovich, first vice president at Merrill, said in a research note.

Users are consolidating purchases with fewer vendors for simplification, a trend that will benefit sector leaders such as Cisco Systems Inc., Dell Inc., International Business Machines Corp., Oracle Corp., Red Hat Inc., SAP AG and Tibco Software Inc., Merrill said.

And companies are increasingly sending work abroad.

With offshore significantly below domestic prices, one CIO even tells vendors he will only accept offshore-level pricing, Milunovich said.

Corporations are also interested in buying new technologies, such as voice over the Internet and open source software that is freely available and modifiable.

Utility computing, which involves sharing computers and is a key part of computer resource outsourcing, has received much attention, but has not taken off yet, CIOs said.

Microsoft Corp.'s desktop dominance is intact, the CIOs said, despite competition from open source system Linux and search giant Google Inc.

New corporate compliance rules, such as Sarbanes-Oxley, are helping to boost budgets in some cases. Solectron's CIO said Sarbanes has been a godsend when justifying technology spending, providing a good reason to buy backup systems.