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Tuesday, April 04, 2006

Optimistic IT Spend Trends & The Age Of Rational Exuberance

Forrester made the call recently : "The Q4 data sets the stage for another year of 7% growth in US IT spending in 2006, with depreciation from prior-year investments in computers, communications equipment, and software and moderate growth in IT services offsetting slower growth in new investment. Security and Web applications will lead software spending, with storage still setting the pace in computer equipment". The report predicted verticals like financial services, professional services, petroleum and gas, industrial products, and retail to increase their IT spending the most. A recent CIO poll results confirm the trend: IT spending projections increased in the first quarter of 2006 with CIOs predicting increases of 8.6% over the next 12 months (up from 7.8% in December 2005). QoQ spending projections increased in Storage systems, Data Networking, Infrastructure software, Computer hardware, Telecom Equipment, eBusiness Applications Software and Outsourced IT services. The Web 2.0 build out could actually be beginning to attract infrastructure investments in storage, data networking and telecommunications products and services. The warning sign : the increase in number of CIOs claiming IT labor is hard to find and keep – it is now at its highest level since April 2001. Those complaining about non availability of offshore resource need to watch this – the labour shortage situation are global in nature. Sentiments look good for core enterprise segment as well – eBusiness application software & outsourcing show healthy growth trends.The CIO Magazine Tech Future Growth Index (TFGI) is showing positive numbers. While uncertainty continues to dog the decision making process of the CIO’s in respect of enterprise segments and with some best of the breed players continuing to show growth and promise, the enterprise software space shall continue to see action with different short term, medium term and long term objectives. Not an easy job to be the CIO in these circumstances though.(Look at this – many CIO’s lose their jobs/ get weakened when an enterprise wide migration engagement goes through.) No wonder to read Computerworld quoting Gary Beach, publisher of CXO media as saying, “CIOs are saying the coming age of rational exuberance is just beyond the horizon and they’re preparing for that and spots a sea change -"do more with less" is being replaced by "do more, more quickly, and grow the business". The survey goes on to predict that the next 18 months could see the age of rational exuberance - where tech investment will get into the low-teen digits and stay there for two or three years as the visions that CIOs and businesses had five years ago come to fruition as business starts to build out. Clearly trends suggest that the growth of new IT investment is expected to keep overall 2006 IT spending growing at the same 7% rate as that of US nominal GDP is growing. When I talk to IT CEO’s around the world, the common message that I get is : These surveys only tell what is known to them – almost everyone believes in seeing more growth than projected. Great times ahead – the money is there, it will be quite interesting to watch how the results of these investments pan out to be down the line.In a few hours from now the Software 2006 starts wit focus on unifying the ecosystem and understanding the way forward. Shall also share my perspectives on the deliberations while the event happens/post the event(mostly post the event considering the packed agenda and a variety of topics that are getting covered)

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"