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CIOs Strong on Storage, Survey Says
IT spending remains conservative, but storage remains a priority, says a Goldman Sachs survey
March 19, 2005
3 Min Read
IT managers spend less these days, but storage is a high priority, and storage suppliers are among the brightest prospects for investors, according to a report from Goldman Sachs & Co.
The firm's quarterly survey of about 100 IT managers in U.S.-based multinational firms shows "stable, but uninspiring spending so far this year," write analyst Laura Conigliaro and colleagues in a note today. Participants, who were polled in late February, plan to increase overall IT spending in 2005 just 3.6 percent. They estimate capital spending on hardware and software to grow 2.9 percent.
When Goldman polled the managers in December 2004, the numbers were higher: Respondents planned a 3.9 uptick in spending for 2005, and growth of 3.7 percent in capital outlay.
Despite the drop, analysts expect overall 2005 spending to grow 4 percent to 5 percent. And so far, the 3 to 4 percent growth estimates given by survey respondents this year top the 2 to 3 percent estimates given last year.
Other survey findings show storage will account for a significant budget chunk:
Storage software, including backup and replication programs, continues to be one of the highest priorities for IT managers.
High-end storage arrays have moved from medium priority in the October 2004 survey to the high-priority list. At the same time, low-end storage arrays have dropped from high- to medium-level priority status.
Interest in high-end storage is growing, Goldman maintains, due to user demand for more capacity and ongoing interest in SANs as a way to relieve disk shortages on enterprise hosts.
When it comes to picking products, the survey suggests CIOs favor "pure-play" storage companies such as EMC Corp. (NYSE: EMC) and Network Appliance Inc. (Nasdaq: NTAP) over diversified system players like Hitachi Data Systems (HDS), Hewlett-Packard Co. (NYSE: HPQ), IBM Corp. (NYSE: IBM), and Sun Microsystems Inc. (Nasdaq: SUNW). The analysts don't give a reason for this trend, though they think it will continue "for the foreseeable future."
Survey respondents report spending the most storage money on NetApp, EMC, IBM, and Dell, in that order. This contrasts with recent figures from IDC that show IBM slipping in quarterly market share (see IDC: Networked Storage Up). The Goldman survey indicates that IBM is a greater threat to EMC than HP or HDS. The analysts say it's possible IBM's long experience with virtualization could add to its mindshare in storage networking.
Indeed, IBM, Cisco, and EMC were picked by the respondents as the "most strategically important storage vendors," in that order. "[W]e suspect that these results can be best explained by the vendors' relative positioning on leading edge concepts such as tiered storage based on increasingly specialized hardware and switch-based virtualization," the analysts write.
NetApp, Brocade Communications Systems Inc. (Nasdaq: BRCD), HP, and Veritas Software Corp. (Nasdaq: VRTS) follow, in that order.
Forlorn at the bottom of the survey list was Sun, which 60 percent of respondents opine as in decline or standing still. Nonetheless, 13 percent think Sun is headed in the right direction. "Sun still faces an uphill battle even though it is back on the radar screen at many customers," the analysts write.Bottom line? It's a tough market, and suppliers who fall behind can take many months to recover. But there is also opportunity. "IT leaders feel they still have a long way to go in protecting, rationalizing, and improving the efficiency of information assets," the analysts write. At this point, Goldman's survey shows CIOs are willing to increase, however slightly, their efforts to improve that scenario.
Mary Jander, Site Editor, Byte and Switch
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