Goldman Sachs has bad news for most of the IT economy: IT spending will slip from 7 percent growth to 5 percent growth in 2008. While not yet recessionary, the outlook is dipping dangerously close to that, as its indexes in its latest IT spending report show:
Expectations of budget growth remain down significantly on a year-over-year basis, with many CIOs limiting their purchases to projects with a high and fast ROI. We continue to believe that 2008 IT spending will decelerate to 5 percent from 7 percent in 2007....Demand for discretionary IT projects dropped to its lowest point in the history of our survey, with caution beginning to spread to the offshore providers.
CIOs have emphasized to us that they are buying on a need versus want basis, are often downsizing deals to fit with current budget constraints.... In fact, contrary to general tightening in spending, purchases with an especially compelling ROI are being accelerated in the current environment.
The sky isn't falling, but it's going to scrape a few vendors' heads in a worsening IT economy. No wonder venture capitalists are bemoaning their exit options and returns.
But not everyone is going to get pummeled. In terms of spending priorities for 2008-09, server virtualization and server consolidation were ranked No. 1 and No. 2, respectively, with cost cutting hitting No. 3 and grid computing and on-demand computing rounding out the very bottom of the list. (In addition to open-source software, which is not surprising because people shouldn't necessarily be proactively "buying open source" so much as buying open-source virtualization, applications, etc.)
In short, no one is clamoring to spend money on buzzwords.… Read more