The bad news is that in its November report on IT spending, Goldman Sachs is projecting a 5 percent decline in 2009 in developed economies (the United States, Western Europe, and Japan), or 65 percent of IT spending, compared with 4 percent expected growth in 2008 and 7 percent growth in 2007. The slowdown will span all vertical markets (financial services, communications, and so on).
The good news? Goldman Sachs expects IT spending in developing economies, which accounts for 35 percent of IT spending, to hit 7 percent growth in 2009. The net? A 1 percent decline in IT spending in 2009.
The other good news? Most IT budgets are weighted toward operating expenditures, with OpEx consuming 75 percent of budgets, leaving just 25 percent for capital expenditures. Why is this good news? Well, that depends on how you make money. If you're an open-source or SaaS company, you fall into the OpEx spending category, where most of the money will be in 2009. If you're trying to peddle proprietary licenses (CapEx), well, good luck with that.
Of course, it's not all bad news for proprietary software vendors, as "operating budgets, which comprise staffing and recurring elements such as maintenance, typically have more resilience associated with them, even in downturns," according to Goldman Sachs. Given that an increasing percentage of revenue for software giants like Oracle comes from maintenance, they should be able to at least tread water on existing deployments.
Hardware vendors, however, should expect a gloomy 2009, but not everyone will be hurt equally.
The report notes that Dell and Hewlett-Packard are gaining in share of server dollars spent, while Sun Microsystems and IBM are losing share. Dell took the No. 1 spot through aggressive discounting, while HP's share remains strong due to its strength in blade computing, according to the report. IBM? It's apparently being hit by its System x servers, down 18 percent year over year.
On the PC side, it's perhaps no surprise that Apple is the biggest gainer in the enterprise, followed by HP and Lenovo. According to IDC, Apple's market share is still only 0.4 percent, but the growth (six straight quarters of share growth, according to Goldman Sachs) bodes well for Apple in the enterprise. Additionally, 20 percent of survey respondents expect to support Apple's iPhone.
As for software, the biggest market share gainers were VMware and Red Hat, with Microsoft and Citrix close behind, while Novell, Informatica, and Tibco Software continue to slide, as does CA and IBM Software, the first time IBM has ever been a share-loser in the history of Goldman Sachs' survey, reflecting "lagging product sets." Time to get agile again, IBM.
On Red Hat, Goldman Sachs had this to say:
Red Hat continues near the top of the group, underscoring a still-strong interest in Linux adoption; our latest checks have also indicated mounting traction for JBoss offerings in the middleware space, particularly in an environment where a lower priced offering may be even more attractive.
Such a value play will continue to auger well for Red Hat as budgets get ever-tighter in 2009, starting in the fourth quarter of 2008. Microsoft? Its gains apparently come from enterprise product upgrades like SQL Server and SharePoint Server, according to the report.
Is there any hope for a strong finish to 2008 before starting into 2009? Not likely. The fourth quarter, which normally includes a fair amount of "budget flush," or attempts to spend remaining budgets before the end of the year, will not be so cheery this year.
According to the report, 52 percent of survey respondents are planning decreased budgets for 2008 in the past three months, which will almost certainly minimize a fourth-quarter budget flush. Indeed, 41 percent of respondents say that their "end-of-year IT spending activity will be less than recent years," and only 17 percent expect fourth-quarter IT spending to increase.
IT spending won't be anything to write home about in 2009, but it should start to separate the wheat from the chaff in terms of vendor selection. And it should be quite good for OpEx-focused vendors in open source and SaaS.