Support Spending Weathers IT Tailspin

Although many enterprises have cut back on technology purchases, they will continue to spend money on external hardware and software support services, according to a survey by Gartner’s Dataquest Inc.

Dataquest surveyed more than 250 organizations in January of 2001, and found that 52 percent expect to increase their spending on external hardware support services and 63 percent expect to increase what they spend on external software support services between 2001 and 2003. For those expecting to increase their budgets, the average two-year increase is expected to be 28 percent for hardware support and 27 percent for software support services. Only a small percentage expect to decrease their spending in each segment, with 13 percent of organizations decreasing their spending on external hardware support and 5 percent on software support.

“This indicates a very healthy sustained opportunity for infrastructure support providers,” said Eric Rocco, vice president for Gartner Dataquest’s IT services worldwide group. “Despite a downturn in IT capital asset spending, users still need to support the assets they have installed. This trend makes the support industry relatively recession-proof.”

The survey results show that the hardware manufacturer is the most popular source of support, ranging from a low of 30 percent of the time for workgroup/LAN servers to a high of 47 percent for storage devices. The most important attribute users look for is the ability to provide a single point-of-contact for all hardware support.

Seventy percent of respondents said they have used Internet-based support services. The usage varies slightly by the size of organization. The respondents reported that they received a satisfactory answer only 52 percent of the time when they used Internet-based support services.

There has been a two-year trend of customers using more Internet-based support, and Dataquest analysts said this is a signal that vendor investment in Web support sites has been worthwhile. However, the participation rate for Internet-based support services and a satisfactory answer rate have been less than satisfactory, especially given the investments made.

“Vendors must focus on increasing the awareness of Internet-based service offerings and improve the satisfaction rate for answers to technical problems,” said Bob Igou, senior analyst for Dataquest’s IT services worldwide group. “Vendors could train their customer service reps to promote Web site use and teach customers how to use its facilities. Recordings on the support interactive voice response may also suggest that customers go to the Web.”

Vendors that do business in Europe have even bigger concerns on the horizon as the likelihood of the U.S. technology slowdown spreading to Europe is increasing, according to International Data Corp. (IDC). IDC research found that any further weakening in the European economy could have a major impact on the demand for IT products and services over the next three years. This global slowdown could reduce worldwide IT spending between 2001 and 2003 by as much as $150 billion, based on a “worst-case scenario” projection, with $50 billion less demand from Europe.

IDC had expected the European IT market to show double-digit growth throughout 2001. A slight slowdown in economic growth across the region was not expected to have a significant impact on IT spending because of regional market dynamics. However, spending in some segments of the European IT hardware has clearly tempered, including weaker demand from service providers for networking equipment and a slowing growth rate for PC sales.

“Software and services are still expected to show strong growth this year,” said Stephen Minton, manager of IDC’s Global IT Economic Outlook research program and the European IT Markets Center. “Similar to the story in North America, we expect that any economic slowdown would have its most severe impact on hardware demand. Historically, hardware spending is highly vulnerable to swings in the overall economy.”

IDC currently forecasts 11 percent growth for IT spending in Western Europe this year. At the bottom end of the economic predictions, a worst-case scenario for Europe would see total IT spending grow only 7.9 percent. A slowdown would likely continue into 2002 and potentially into 2003 as the European economy struggles to maintain growth while controlling inflation. The most at-risk countries include Germany and Italy, with Britain expected to be more stable.

“For European suppliers, the importance of understanding the broad economic picture has never been more important. Events in the United States have dispelled the myth that technology spending is immune to an economic slowdown,” Minton said.

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