Slim Pickings in Giga Forecast

The latest numbers from research firm Giga Information Group Inc. could be good news for the beleaguered storage service provider industry.

Although the majority of the report is downbeat -- IT budgets fell more in 2001 than the firm had previously estimated, and the rebound in 2002 will be disappointing -- there is some good news buried in it.

Within the IT sector, management software and consulting/outsourcing vendors will do better in 2002, with growth in spending of 8 percent and 12 percent, respectively.

If Giga is right, this is a major bonus for the ten or more struggling storage service providers (SSPs) out there that morphed their businesses in 2001 from the failed storage-on-demand model to selling management software and consulting services. They could actually end up in the right place at the right time for a change (see SSPs Switch to Selling Software and Sanrise Wakes Up).

Based on changes in the economic picture since September, Giga is revising its forecast for U.S. IT budgets downward for this year and next. Total IT spending in 2001 is now expected to be down 5 percent from 2000, a drop of 2 percent, and up 4 percent instead of 7 percent in 2002, Giga estimates.The news is somewhat gloomy when compared with the insatiable growth rates in IT spending of more than 20 percent in 1999 and 2000.

The report states: IT overall will be a drag on the economy through 2002, not the engine of growth that it was in the 1990s. IT vendors -- especially those selling computer and telecom hardware -- will continue to struggle with weak demand until the second half of 2002 at the earliest.”

Giga says that the great majority of companies will be much more conservative and cautious about their IT investments next year, focusing on using their existing IT systems more effectively and making them more secure -- and avoiding large-ticket capital investments whenever possible.

In addition, ”Companies can find great opportunities to acquire technology products and services at lower prices in 2002, but they need to pay careful attention to the viability of the vendor,” says Andrew Bartels, VP of research at Giga and author of the report.

— Jo Maitland, Senior Editor, Byte and Switch
http://www.byteandswitch.com