Goldman Sachs has delivered some bad news for IT vendors.
In its "Independent Insight: U.S. Technology Strategy" report released Monday, Goldman Sachs predicts that IT spending growth in 2008 will drop to 4 percent from a former projection of 6 percent and that pricing pressure on vendors is going to get worse.
The good news, however, is that Goldman Sachs doesn't see IT spending levels dropping to their 2001-2002 or 1990-1991 levels due to more rational IT spending from 2003 to 2007. In other words, we have don't have as far to fall. The even better news if you're open-source vendor Red Hat? Shrinking IT budgets are your friend.
Where will IT dollars likely go? According to Goldman Sachs, hardware spending has likely already been cut as much as it's going to be, leading enterprises to look to save money with internal IT staff cuts and lower spending on services. Services, however, are more likely to be cut for onsite services, with 50 percent of Goldman Sachs survey respondents indicating that they will be cutting services budgets: offshore services are expected to remain relatively strong.
Not everyone is losing out in the downward economy, of course. Goldman Sachs sees growing enterprise interest in Apple's iPhone, for example. Software, too, may be a moderately bright spot:
In general, indications of software spending are marginally better than for overall tech spending, while indications for spending with Oracle looked better still. Linux is still making headway in the enterprise, with our responses showing Red Hat's dominance may actually be growing. A first read showed a meaningful proportion [21 percent] of respondents planning to test Google apps, a negative for Microsoft longer term.
Oracle is succeeding, with 35 percent of survey respondents indicating that they plan to increase Oracle spending, because it can aggressively cross-sell its vast product portfolio at a low customer acquisition cost, while Red Hat and Google are winning because they offer superior value propositions. Unfortunately, Novell isn't seeing the same open-source bounce as Red Hat.… Read more