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ChangeWave Research Report: Corporate IT Spending: 90 Day Outlook Grim IT Spending Findings Indicate Rougher Times Lie Ahead August 25, 2008 Overview The downturn in the U.S. economy is far from over. ChangeWave’s latest IT purchasing survey shows an even greater pullback occurring in corporate spending – both for the current quarter so far and for the next 90 days going forward. The survey of 1,947 respondents involved with IT spending in their organization was conducted August 11-21. Current 3rd Quarter Spending: When we asked respondents if their 3rd Quarter IT spending was on track to date, the results were the worst we’ve seen in a ChangeWave survey.
Three-in-ten (30%) say they’ve spent “Less than Planned” – 3-pts worse than our May survey. Just 12% have spent “More than Planned.” Visibility Going Forward – A Picture of Negative Growth: Looking ahead, the results are correspondingly grim, with 29% saying their company’s IT spending will decrease (or there will be no spending at all) in the 4th Quarter – 5-pts worse than the previous survey.
At the same time, just 13% say spending will increase – a drop of 2-pts from previously. Thus, the brief period of stabilizing we picked up in May has given way to another major leg downward. In fact, you have to go way back to the middle of the last recession (August 2001) to find a ChangeWave survey projecting this big of an IT spending downturn. Less Willingness to Spend: We also asked respondents to rate the current willingness of their company to spend money on IT products and services. Better than three-in-five (61%) say their company has placed a “Yellow Light/Red Light" on IT spending – 5-pts worse than the previous quarter.
Only 34% say their company is giving a "Green Light" to IT spending (i.e., spending is normal). Impact of High Energy Costs: Better than a third of corporate respondents (35%) reported high energy costs were affecting their company’s IT spending plans for second half 2008, 1-pt worse than previously. Impact of the Election: Almost as importantly, one-in-four respondents (25%) say the looming U.S. presidential election is having an impact on their company’s IT spending decisions (5% Significant Impact, 8% Moderate and 12% Slight). This further supports the thesis that corporate America has currently placed a considerable percentage of spending decisions on hold, at least till after the November elections. And perhaps longer. When we asked respondents exactly when they thought IT spending would pick up in their company, a robust 39% said not until at least the 2nd Quarter of 2009 or later. Corporate Smart Phones Research In Motion Holds its Lead: In the midst of this exceptionally difficult spending environment, smart phone leader Research in Motion (RIMM; 77% – up 1-pt) continues to hold onto its big lead in the corporate smart phone market. Apple (AAPL; 9%), however, has gained 3-pts in terms of current market share. And while corporate users of the iPhone did report slightly lower satisfaction levels than in the previous survey, the iPhone still ranks highest in the industry.
Palm (PALM; 15% – down 2-pts), on the other hand, continues on its multi-year slide. Planned Corporate Smart Phone Buying: Looking ahead to the 4th Quarter, RIM (79%) continues to overshadow its two main competitors in terms of planned purchases – but we note that it’s down a full 3-pts from the record high it registered in May.
Apple (17%) is continuing to show considerable momentum in terms of corporate planned purchases – up 4-pts from previously. Thus while recent ChangeWave consumer surveys have shown the 3G iPhone having a huge impact on consumer demand, the current results show the iPhone is beginning to gain real traction in the corporate market as well. In yet another positive for Apple, 19% report the release of the 3G iPhone has made their company More Likely to purchase Apple products in the future – only 1% say Less Likely. Corporate PC Purchases: Our survey has also picked up signs of slower corporate PC growth for the 4th Quarter. We’ll take a close look at corporate PC purchasing – including how the current slowdown is impacting major manufacturers – in an upcoming ChangeWave report. Bottom Line: Historically, ChangeWave’s mid-quarter corporate IT spending survey has proven to be an accurate early indicator of how the quarter is actually going to turn out. The grim findings of the current survey indicate that the U.S. economic downturn is far from over – indeed, the findings indicate even rougher times lie ahead. Not only are IT expenditures lower-than-expected thus far in the current 3rd Quarter, but visibility over the next 90 days shows no signs of improvement. These survey results lend strong support to the thesis that corporate America will continue to hold its powder dry in terms of IT capital investment – at least until after the November elections and possibly for far longer. In the same survey we also focused on corporate smart phone buying, and here Research In Motion holds a huge and still expanding market share lead – even as their outlook going forward has begun to show signs of weakening. Note that that we also picked up weaker visibility for RIM in our most recent consumer smart phone survey (June 2008). Thus, at least momentarily, RIM appears to be confronted with visibility issues on both the consumer and corporate fronts. While the success of RIM’s upcoming new product launches could put most of these issues to rest, the first new RIM launch – the Bold – is still not yet available in the U.S. When you place this in the context of the current ‘take no prisoners’ stock market, it’s likely that RIM will be in for a bumpy ride with investors short term – until they have some proof that RIM’s new products are being successfully brought to market. In the meantime, Apple has been showing some momentum of its own in the corporate smart phone market. Moreover, the release of the 3G iPhone appears to be having a positive ‘halo effect’ in terms of improving overall corporate purchasing intentions for Apple products in general. Table of Contents
ChangeWave Research Methodology
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The downturn in the U.S. economy is far from over. ChangeWave’s latest IT purchasing survey shows an even greater pullback occurring in corporate spending – both for the current quarter so far and for the next 90 days going forward. The survey of 1,947 respondents involved with IT spending in their organization was conducted August 11-21. Current 3rd Quarter Spending: When we asked respondents if their 3rd Quarter IT spending was on track to date, the results were the worst we’ve seen in a ChangeWave survey. Three-in-ten (30%) say they’ve spent “Less than Planned” – 3-pts worse than our May survey. Just 12% have spent “More than Planned.” 3rd Quarter IT Spending by Company Size
At the same time, just 13% say spending will increase – a drop of 2-pts from previously. Thus, the brief period of stabilizing we picked up in May has given way to another major leg downward. In fact, you have to go way back to the middle of the last recession (August 2001) to find a ChangeWave survey projecting this big of an IT spending downturn. The decrease in projected IT spending for the 4th Quarter continues to occur across companies of all sizes – including small (1-10 Employees), medium (11-100 and 101–1,000) and large (over 1,000 employees) companies. Projected IT Spending for Next Quarter (4Q 2008) – By Company Size
Only 34% say their company is giving a "Green Light" to IT spending (i.e., spending is normal). Willingness of Company to Spend on IT Products and Services – By Company Size
(2) And for which of the following main IT spending categories – if any – have you spent less than planned thus far in the 3rd Quarter? (Check All That Apply)
In terms of individual categories, Storage (Change in Net Difference Score = -2) and Communications (-2) are registering the biggest slowdowns of any IT category.
Note that 47% say their IT budgets will remain the same.
Reductions in IT Expenditures: In terms of the measures companies are taking to cut costs and reduce IT expenditures, 38% say their company is delaying purchases and upgrades. Another 19% are reducing staff.
(4) How much of an impact is the upcoming U.S. Presidential election having on your company's IT Spending decisions?
Impact of the Election: One-in-four respondents (25%) say the looming U.S. presidential election is having an impact on their company’s IT spending decisions (5% Significant Impact, 8% Moderate and 12% Slight). This further supports the thesis that corporate America has currently placed a considerable percentage of spending decisions on hold, at least till after the November elections. And perhaps longer. When we asked respondents exactly when they thought IT spending would pick up in their company, a robust 39% said not until at least the 2nd Quarter of 2009 or later.
Impact of High Energy Costs: Better than a third of corporate respondents (35%) reported high energy costs were affecting their company’s IT spending plans for second half 2008, 1-pt worse than previously. Breakdown by Company Size – Current Survey (Aug 2008)
(1) Does your company currently provide employees with Smart Phones?
Research In Motion Holds it Lead: In the midst of this exceptionally difficult spending environment, smart phone leader Research in Motion (RIMM; 77% – up 1-pt) continues to hold onto its big lead in the corporate smart phone market. Apple (AAPL; 9%), however, has gained 3-pts in terms of current market share. And while corporate users of the iPhone did report slightly lower satisfaction levels than in the previous survey, the iPhone still ranks highest in the industry.
Palm (PALM; 15% – down 2-pts), on the other hand, continues on its multi-year slide. (1A) Who is the manufacturer of the current Smart Phones your company provides? (Check All That Apply)
Planned Corporate Smart Phone Buying: Looking ahead to the 4th Quarter, RIM (79%) continues to overshadow its two main competitors in terms of planned purchases – but we note that it’s down a full 3-pts from the record high it registered in May.
Apple (17%) is continuing to show considerable momentum in terms of corporate planned purchases – up 4-pts from previously. Thus while recent ChangeWave consumer surveys have shown the 3G iPhone having a huge impact on consumer demand, the current results show the iPhone is beginning to gain real traction in the corporate market as well. Palm (6%) is down 2-pts as a distant third place in terms of future buying. (2) (FOR THOSE COMPANIES BUYING SMART PHONES IN 4TH QUARTER 2008) Who is the manufacturer of the Smart Phones your company is planning on buying? (Check All That Apply)
(3) Below is a list of several recent Apple product releases. For each, please tell us if the release of this product has made your company more likely to purchase Apple products in the future, less likely, or if it has had no effect.
In yet another positive for Apple, 19% report the release of the 3G iPhone has made their company More Likely to purchase Apple products in the future – only 1% say Less Likely. Corporate Smart Phone Customer Satisfaction (4) And how satisfied is your company with their current Smart Phones? (Please rate only those manufacturers your company currently provides.) Current Survey (Aug 2008)
While Apple may be experiencing an uptick in their corporate market share, we are seeing a decline in the area of customer satisfaction. Nonetheless, they remain at very high levels and continue to outperform the competition – 57% of their business customers say their company is Very Satisfied with the iPhone.
RIM is a very strong second in terms of customer satisfaction (52% Very Satisfied rating). Palm (13%) remains at the bottom end in terms of corporate smart phone satisfaction.
The current findings are based on a survey of ChangeWave Alliance members involved with IT spending in their organization, conducted August 11-21, 2008. The goal of the survey was to get an up-to-date picture of IT spending for the 4th Quarter of 2008. To this end, the survey was composed of a sample of 1,947 accredited Alliance members. The Alliance's proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports. The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (56%) have advanced degrees (e.g., Master's or Ph.D.) and 93% have at least a four-year bachelor's degree. The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.
ChangeWave Research, a subsidiary of InvestorPlace Media, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries. ChangeWave has a very unique asset in its 15,000-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel. The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change. This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy - well in advance of other available sources. ChangeWave delivers its products and services on the Web at www.ChangeWave.com. ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report. For More Information:
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