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More bad news for Indian IT firms

NetScribes/Ganesh Ramamoorthy

There is more bad news coming from the US for Indian software companies. US-based investment banker, Morgan Stanley Dean Witter said in its CIO Survey, released on Monday, that the percentage of CIOs expecting the US economy to improve sometime this year dropped from 61 per cent in March to 43 per cent in May.

"About 57 per cent of the respondents believe that the economy will not begin to improve at least until next year," MSDW said in its report released on June 4, 2001.

Also, the percentage of CIOs (225 respondents) reporting requests for cuts from senior management, smaller deal sizes, or slowing/less spending, increased from 33 per cent in March to 40 per cent in April, and to 50 per cent in May.

The proportion of CIOs who have not changed their spending plans also dropped to 30 per cent this month from 40 per cent in April.

"The percentage of CIOs planning to spend less or spend more slowly this year increased from 31 per cent in April to 35 per cent in May," MSDW said.

Moreover, 72 per cent of the CIOs said that there was no impact of the surprise interest rate cut by the Federal Reserve in April.

"Apparently, most CIOs see no connection between their IT spending and what the Fed is doing to interest rates," the survey said.

Consulting retained its No. 1 ranking as the area most likely to be cut in an IT spending slowdown. New custom development stayed in the No. 2 spot.

The big mover in this month's survey was the issue of Microsoft Office upgrades - moving up 14 spots from No. 17 in April to No. 3 this month; it had been No. 5 and No. 8 in February and March, respectively.

Security software and network equipment retained the No. 1 and No. 2 spots this month, respectively, in IT spending areas least likely to be cut.

Customer service applications rebounded to No. 3 after slipping to a tie for No. 6 last month (customer service applications had been in a tie for the No. 1 spot in both February and March). Call center projects made one of the bigger moves in this area, up from No. 19 to a tie for No. 8.

The percentage of respondents saying they have embraced Java servers as a standard increased from 9 per cent in September 2000 to 16 per cent this month.

"Those who responded "partially" increased from 14 per cent to 23 per cent, while those responding "no" decreased from 58 per cent to 45 per cent," the survey said.

A large majority of respondents (around 89 per cent) say that they are not considering changing database vendors.

Application integration remains the most strategic software project for over 35 per cent of the respondents, followed by e-business at 33 per cent and CRM at 30 per cent of the respondents. Interestingly, about 30 per cent of the respondents felt that customer service applications give the highest RoI, followed by e-commerce initiatives (at 25 per cent of respondents) and call center projects (at 24 per cent).

With respect to back-office applications, 31 per cent of the respondents said they have completed their ERP rollout while another 12 per cent were almost complete, suggesting that nearly half of the market has been fully penetrated.

Only about 12 per cent of the CIOs are considering ERP purchases in the coming year.

Morgan Stanley's CIO survey, is a series of monthly survey that tracks about 225 CIOs in US companies on their IT spending plans and hardware and software preferences. The next survey is due for release in July.

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