Top IT Spending Priority Is Cutting Costs, Investors Told

By Stuart Glascock

SEATTLE—Instead of adopting emerging technologies from new companies, the top enterprise IT spending priority isn't spending at all. It is cost cutting, a survey says.

“This is a corporate profits recession that we're in,” said Richard Sherlund, managing director and analyst in the investment research department at Goldman, Sachs & Co.

Sherlund spoke Wednesday at the Washington Software Association Investment Forum. Ironically, he assessed the gloomy state of the software industry even as a select group of startup and early stage companies tried to raise capital.

After cost cutting, according to data from a Goldman Sachs' May survey, the dominant items on IT's agenda are information security, application integration, and disaster recovery. Last year, CRM was high on the list; not so this year.

Lowest spending priorities are on managed network services, network convergence, and replacing aging hardware. “The new stuff is not real high priority right now,” Sherlund said.

Products that ranked highest on the survey included: security software, Windows 2000, and security hardware. The lowest-ranked product, according to the survey, is Linux servers, which Sherlund noted “was very popular in the dot-com community but has moved to the back burner.”

In software, he said, Microsoft, Oracle, and Veritas are gaining, while Novell, Computer Associates, and PeopleSoft are losing.

About the timing of the recovery: “We have probably seen the bottom here. We are probably just bouncing along the bottom,” Sherlund said.

That was at least a hint of positive news for the 18 hopeful startups that presented at the forum. Those companies ranged from 4thpass, which makes Java-based server-side software for wireless carriers, to Apex NanoTechnologies, which works in computer-aided molecular design for chemists and biochemists.