Report: IT misery to extend through fiscal year

Enterprise spending may not get an expected bounce in the second half of the year, according to Wall Street analyst firm Merrill Lynch & Co. Inc., which recently doled out grim financial predictions, particularly for the PC industry.

Seventy-two per cent of corporate officials polled recently said they would not increase spending in the latter part of 2001, according to a July 10 report prepared by Merrill Lynch.

Instead, enterprise chief financial officers (CFOs) are still telling technology shops to keep a check on IT spending and to look more closely at the returns on investment. They are “telling us to hold it down,” replied respondents to the Merrill Lynch research effort.

Merrill Lynch then bounced various predictions from industry luminaries off survey respondents; for instance, asking whether officials agreed with Dell Computer CEO Michael Dell’s guess that late 2002 would usher in a PC replacement cycle.

Sixty-two per cent said they did not expect any sort of sweeping replacement cycle would take place next year.

Another company likely to pale over the Merrill Lynch report is Microsoft, which is marching toward an overall subscription model.

About two-thirds of those polled said they are against such a model. Most users opined that the Microsoft move would likely mean higher costs and less control for them.

Instead of subscription-based services, users said they would be more inclined toward a pay-as-you-go scenario.

“Most users don’t like the subscription model, perhaps figuring that any proactive move by the Redmond, [Wash.-based] giant will mean taking out their checkbook,” noted the survey.

However, most respondents agreed that most “IT decisions will be increasingly services-led.” Seventy-eight percent went on to say that in the future technology will more than likely be delivered as a service.

On the positive side, users unanimously agreed with a recent comment made by IBM CEO Lou Gerstner, who said the “dot-com implosion” should not be equated with the end of e-business.

Users went on to note through responses that middleware, as opposed to operating systems, is now a dominant slice of the industry. This finding represents another nod at IBM, maker of Websphere, MQSeries, and DB2.

Finally, Merrill Lynch dished out a mixed bag on Linux. Only 32 per cent of those polled indicated a willingness to buy Linux “in a meaningful way” over the next year and a half. But half of those polled said Linux is a threat to Sun Solaris and 38 per cent said the technology is a threat to Microsoft NT.

The news from Merrill Lynch comes at a time when Gartner Inc. is reporting that IT spending will rise over the next year-and-a-half [see story – Gartner: IT spending still rising].

Merrill Lynch in Canada can be reached at