Technology buyers are more pessimistic about a recovery in
information technology spending following the Sept. 11 terrorist attacks, according to a Merrill Lynch survey of 50 U.S. and European chief information officers.
The survey is Merrill's first since the Sept. 11 attacks. The brokerage regularly gauges the opinions of CIOs to get a read on the tech sector.
In general, U.S. CIOs were glummer about IT spending than their European counterparts. Seventy-three percent of the CIOs said their business had been hurt by the Sept. 11 attacks, but only 23 percent said their companies were directly affected.
Nevertheless, two-thirds of the respondents said IT spending would improve later than expected. Merrill's last survey found that 45 percent of CIOs had expected to boost spending in the second quarter of 2002. Following the terrorist attacks, 32 percent said they plan to spend more in the second quarter.
And 17 percent of the CIOs were even more pessimistic, predicting that IT spending wouldn't improve until 2003. The executives predicted that their budget growth would be 2.2 percent in 2002.
The survey also found that CIOs have rejiggered the priorities for their spending, focusing on security software, disaster recovery and remote access. "Generally, IT folks view security as an insurance policy and would prefer to spend elsewhere," said Merrill tech strategist Steven Milunovich. "That may not be an option now."
CIOs said the focus on security spending would mean less demand for wired telephone systems, Microsoft's Internet Information Server (IIS), noncritical software such as Windows XP and emerging technology.
Among other key findings:
• Of the CIOs surveyed, 20 percent said they would spend more on voice over Internet technology. "IP telephony was the only way to communicate in lower Manhattan during the attacks," the Merrill survey said. "Cisco is the major provider. Again, Wall Street might be different, but we think it's also a predictor of where mainstream IT will go," he said.
• About 70 percent of CIOs said they would upgrade their PCs next year to the latest versions of Windows and replace older computers.
• Sixty-two percent of the CIOs said they won't buy Windows XP. Business users indicated they would go to Windows 2000 instead. "Those doing the upgrade felt the benefits were significant or would move as part of their enterprise agreements with Microsoft," the survey said. "A greater number, however, aren't going to XP because of a lack of a compelling value proposition, fear of disruption or unwillingness to buy a first version."
• CIOs also expected prices to fall for PCs, data storage, servers, software, consulting and networking. Of those surveyed, 92 percent said vendors would have more pricing pressure.