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Survey says software spending stable

By Ann Bednarz , Network World , 10/10/2005
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IT budgets are generally stable, but companies are still looking for ways to reduce IT expenses, according to new research from Goldman Sachs.

In the firm's latest IT Spending Survey, conducted in August of 100 managers at multinational Fortune 1000 companies, 71% of respondents said their IT budgets are stable. Of the remaining respondents, 20% said their IT budgets still are getting squeezed by top management and falling as a percentage of revenue. Only 9% indicated their IT budgets are growing faster than the overall business and as a percentage of the company's revenue.

As companies begin to slowly but surely shift toward deploying services-oriented architectures (SOA ), Goldman Sachs expects they'll be on the lookout for infrastructure software - such as systems management and security products - and integration services. In addition, early stage SOAs will require software to help companies tie together loosely coupled software components, including application integration, portal and business process management tools. As SOAs mature, the need for robust infrastructure products, such as a service registry and enterprise service bus, may become more compelling, according to the firm's research.

Conversely, spending on server hardware might decrease as companies shift from resource-consuming, monolithic applications and toward loosely coupled applications. Spending on custom application software could fall as SOAs emerge and make it easier for companies to cobble together and deploy applications using modular services, Goldman Sachs reports.

On the vendor front, business intelligence players are ripe for gains. Goldman Sachs routinely asks respondents which vendors are gaining and which are losing share of IT spending. The firm for the first time added business intelligence vendors to its menu of software companies, and Hyperion and Cognos both ranked among the top 10 share gainers. The analysts say the popularity of business intelligence vendors is due to the increasing importance of financial analytic applications.

Server virtualization technology also is in demand. VMware, a subsidiary of EMC, led the pack of companies gaining IT spending share, Goldman Sachs reports.

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