Giga Predicts Flat Spending for Year

Scaling back its predictions, analyst firm Giga Information Group issued a report today suggesting flat spending in IT this year. Giga initially predicted modest growth for the year.

Not only will the year be slow, but Giga also says spending in the first quarter 2002 was actually slower than the second half of last year. Their research indicates, however, that spending will rise in the second half of this year, as managers relax about spending.

Giga’s research is based, in part on U.S. Department of Commerce Gross Domestic Product (GDP) figures, which indicate business spending on technology was down in the first quarter by 11 percent, year-over-year.

One of the hardest hit areas of IT spending is enterprise applications from the likes of SAP, PeopleSoft, and Siebel. According to Giga, companies spent 30 percent less in the first quarter 2002 than they did in the same quarter a year ago, and 30 percent less compared to the fourth quarter of 2001. Giga believes most enterprises are working to maximize value from existing applications, rather than deploy new projects. The company believes spending for the year overall will be down five to ten percent.

On the other hand, integration tools could experience significant growth this year, according to Giga. It says applications servers have grown between 25 percent and 50 percent in the past six months, and IBM’s WebSphere application server alone grew 53 percent year-over-year. Traditional EAI platforms such as WebMethods and Tibco are slow, according to the report, but Giga says it has received a lot of queries from customers regarding EAI.

Giga says there are opportunities in the server market for vendors who can show cost savings over old equipment. It suggests much of the consolidation mania from Sun and IBM may be attributed to the large number of servers coming off of three-year leases signed during the dot com boom. It believes Sun probably has the most opportunity here.

Finally, data management products, such as relational databases and data warehousing tools, will likely return to normal growth this year, Giga says. It believes that the pent-up demand for these tools will return growth to 10 or 12 percent.

Giga believes that enterprises have the opportunity to cut favorable deals with IT suppliers, given the stagnant technology market. It cautions, however, purchasing from a company on the verge of acquisition or bankruptcy may be risky.