Study: Corporate IT purchasing continues to weaken

With U.S. customer demand for a broad array of IT products continuing to slump and European markets showing signs of a similar slowdown, the near-future outlook for IT vendors is bleak, said channel research and consulting firm Global Touch Inc.

More than sixty per cent of the firms surveyed in Global Touch’s third-quarter 2001 Channel Tracker study said third-quarter sales were below expectations, with almost 90 per cent reporting that U.S. sales were flat or below second-quarter 2001 sales.

Unix server sales were particularly hard hit, with 84 per cent of sellers reporting U.S. sales below or “extremely below” expectations. Just over half had the same results in Europe.

Nearly 500 IT industry firms in Europe and the U.S. participate in the quarterly Channel Tracker report, conducted in conjunction with Morgan Stanley Dean Witter & Co.’s Technology Group.

The study surveys distributors, resellers, direct marketers and retailers, and focuses on general purchasing issues and hardware, including PCs, Unix servers, printers and networking and enterprise storage products. The third-quarter report covers the three-month period that ended Sept. 30.

Overall, the European market was stronger than the U.S. market in the third quarter, according to Global Touch. While U.S. enterprise storage revenue for the quarter was below expectations for 84 per cent of those surveyed, European enterprise storage revenue was in line with expectations for 73 per cent of respondents. PC server sales also held steadier in Europe: 57 per cent of respondents said planned U.S. customer orders were cancelled or postponed, while only 18 per cent reported similar problems in Europe.

But European markets are showing signs of a further slowdown, and the events of Sept. 11 exacerbated an already rocky situation, Global Touch said. Uncertainty about the future along with unexpected increases in expenditures on disaster planning, data back-up and security are leading to cash crunches for many companies, according to the report.

Overall IT spending is unlikely to rebound in time for the traditional fourth-quarter upswing, said Global Touch President and chief executive officer Denise Sangster – which could lead to price wars in an industry already operating on razor-thin margins. Vendors need to more broadly distribute debt load or risk losing their distribution partners to financial collapse, Sangster said.

There are already signs of price pressures, Global Touch reported: Channel partners expect U.S. prices to be “very competitive” in the fourth quarter, particularly for ink-jet printers and enterprise storage. European pricing is expected to be somewhat less competitive, according to the study.

Global Touch’s next installment of its Channel Tracker, covering fourth-quarter 2001, will be released in January 2002.

Global Touch, located in Berkeley, Calif., is at