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4-year PC upgrade cycle – ‘well entrenched’

Modest IT spending growth

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ComputerWire: IT Industry Intelligence

Corporate IT spending will increase this year, a survey by SG Cowen has predicted, but PC vendors banking on pent-up demand and a long-delayed upgrade cycle to push growth rates back to 1990s levels will be disappointed.

The survey of corporate spending plans suggested that IT spending growth will pickup this year, "only slightly." Budgets will rise 1.8% this year, the survey showed, before hitting a slightly less anemic growth rate of 3.4% in 2003.

Spending growth is most subdued amongst larger users, with budgets at companies with turnover of $250m or more likely to rise just 0.5% this year, and 1.8% next year. Their smaller counterparts are likely to increase budgets by 5.5% this year and 8% in 2003.

Ever since PC sales growth stalled in 2000, vendors have been looking for a bonus from pent-up demand as pre-Y2K purchases come to the end of their useful life and as corporates shift to Windows XP. SG Cowen identified PC replacement as a key driver, but said that nonetheless, this would be modest. More distressingly for embattled PC vendors, SG Cowen declared that a "move to a four year PC life cycle is now well entrenched."

Nevertheless, an aging fleet of corporate PCs means PC upgrade budgets will increase 17% this year, and 20% in 2003, with Office XP adoption being a major driver. WLAN budgets will be up 4% this year, and 17% next year, while applications integration budgets will be up 7% this year and 14% next year. All other categories will show single digit budget growth this year and next.

Corporates appeared to be increasingly reliant on Dell and IBM according to the survey, with other vendors, including the combined HP and Compaq, apparently having a slightly reduced role in customers' future plans.

The survey also showed that Linux and Windows were both gaining momentum, with Linux' advantage being gained at the expense of Unix.

© ComputerWire

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