Merrill outlines Euro 2003 IT spending outlook

Flatter than flat pancake

A quarterly poll of 100 European CIOs by investment bank Merrill Lynch sounds a muted outlook for the year ahead with average IT budget growth of just 0.8% against 2002 levels, although IT spending plans look more certain than in surveys carried out in previous quarters.

A majority 43% slice of respondents anticipated that spending on software in 2003 will remain flat relative to 2002, with 36% of all respondents saying that new hardware would be where they would increase their spending first.

Pricing pressure in IT services appears to be abating with only 41% of respondents having extracted price reductions from their IT services vendors in the last six months, compared to 58% in the bank's last quarterly survey. However, some 46% of respondents believe that they will be able to obtain discounts on their software maintenance contracts in 2003.

That pricing pressure appears most acute among IT services companies in the UK, where 59% of respondents had achieved price reductions in the last six months with 41% winning price reductions of more than 10%.

Overall, a substantial 41% of the average outsourcing service contract was found to comprise discretionary top-up work which could be cancelled at short notice. This was particularly pronounced in the UK and Germany where figures rose to around 55%.

Some 42% of all CIOs said that they had no plans to outsource major operations - evidence, the bank suggests, of a discernible trend for CIOs to increase the amount of IT services work done in-house. Certainly, there was only limited evidence of companies planning to buy more integration and implementation services from their software vendors. This was something that was particularly pronounced in France, where 85% of respondents said that they had no such plans.

Merrill's European CIO survey is based on a panel of 100 companies that were interviewed in November and December 2002 by ComputerWire.

© Computerwire

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