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Morgan Stanley foresees less investment in IT sector

BS ICE Bureau

Bad weather continues to loom over the Indian software sector with the latest CIO Survey by Morgan Stanley Dean Witter revealing that more and more US chief investment officers plan to either spend less or spend slowly in 2001.

The report says, "The percentage of CIOs planning to spend less or spend more slowly this year increased from 27 pert cent in March to 35 per cent in May."

The survey also says that the percentage of CIOs expecting the US economy to improve sometime this year has dropped from 61 per cent in March to 43 per cent in May. "About 57 per cent of the respondents believe that the US economy will not start improving before next year," MSDW said in its report.

MSDW's CIO survey, is a series of monthly surveys that tracks about 225 CIOs in US companies on their IT spending plans and hardware and software preferences.

The percentage of CIOs reporting requests for cuts from senior management, smaller deal sizes, or slowing 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 dropped to 30 per cent this month from 40 per cent in April.

An interesting point that the survey has brought out is the fact that 72 per cent of the CIOs said that there was no impact of the surprise interest rate cut by the Federal Reserve in April. And it says "apparently, most CIOs see no connection between their IT spending and what the Fed is doing to interest rates".

While consulting still 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 from the previous survey.

Among the IT spending areas that are least likely to be cut are the security software and network equipment area. Both these have retained their respective spots at No.1 and No.2 in the June survey. Customer service applications rebounded to No. 3 after slipping to a tie for No. 6 last month.

Interestingly, about 30 per cent of the respondents felt that customer service applications gives the highest return on investment, followed by e-commerce initiatives (at 25 per cent of respondents) and call centre projects (at 24 per cent). Call centre projects made one of the bigger moves in this area, up from No. 19 to a tie for No. 8.

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.

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.

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.

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

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