Thursday, August 14, 2003
In discussions with technology sales people here in Southern California, I'm hearing mixed reports regarding corporate IT spending. The bottom line is that IT spending is picking up, but not in all areas. Here's the buzz.
Certainly, we're not in the technology boom times of the 1990s. But that doesn't mean IT spending is moribund. It's just happening in different directions today.
- In the mid-market, spending on new ERP and CRM systems continues to be slow. Most mid-market companies are still attempting to extend the life of existing systems with add-on's or complementary products and are only buying new ERP systems when existing systems are clearly inadequate. There is a pick up of mid-market activity is some verticals, such as life sciences, health care, and defense contractors, but among many verticals, such as high tech electronics, there is not much appetite for large investments.
- With large companies, on the other hand, spending is stronger. But it revolves around streamlining IT processes and cost savings. Specifically, there is a lot of interest in anything that reduces space requirements, such as blade servers.
- Data center facilities are now hot properties. Nationwide there is strong demand for new data center space. The need is driven by several regulatory mandates: HIPAA, which drives increase in electronic records in healthcare, Federal Reserve regulations that require banks to have backup sites outside the region of existing data centers, and Sarbanes-Oxley requirements for stronger internal controls such as audit trails, which increase demand for data storage. One source mentioned a case where several banks got into a bidding war for an empty data center facility that came on the market.
- Phoenix and Nevada appear to be strong markets. This is being driven by the high cost of doing business in California and the proximity of Arizona and Nevada, which makes them attractive as backup/recovery sites.
- When companies go shopping for new application systems, they are showing strong interest in Linux-based systems, mostly because of perceived cost savings. Consistent with this, enterprise system vendors such as Oracle and PeopleSoft are promoting Linux because it allows them to lower the cost of hardware and operating systems in the deal, leaving a larger share of the budget available for software licenses.