Watch this Space

Fancy a solid gold Rolex watch? A friend on London’s Bond Street, tells me that the prices on “pre-owned” models are falling sharply as the supply increases. In other words, one of the more accurate but less official economic barometers suggests that hard times are with us again.

Last week wasn’t kind to Sun Microsystems or even IBM. Results for both companies to December 2002 showed close to a 6% decline. Of course, it could have been worse, much worse and only Microsoft was left grinning and able to announce a dividend, as net income for the company rose on comfortable turnover, (up 17.5% on the comparitive period in 2001)

Interestingly enough, both IBM and Sun are of course Penguin fans and Linux is still some way from becoming a truly profitable interest for either company. IBM’s Linux-on-mainframe MIPS shipments were up 45%. A’ MIP’ by the way is a ‘Meaningless Indicator of Processor Speed’. Both Sun and IBM have rather different views on where Linux should ‘play’ in the Enterprise, with IBM very much in favour of offering a Penguin in every box, while Sun prefers to keep its own Penguins safely tucked away on the edge of the network where they can be admired at a distance.

Meanwhile, investment bank Merrill Lynch in its quarterly poll of 100 European CIOs, is predicting that average growth in IT budgets will remain below 1% against last year’s levels, with the only ray of sunlight in its research, being the suggestion, that IT spending on hardware, rather than software, may be more likely in the first quarter of this year than it was in the last quarter of 2002.

Curiously enough, last year’s enthusiasm for outsourcing appears to be one of the casualties of the survey, with 42% of CIOs claiming that they had no plans to outsource major operations this year. This news may offer a little comfort to an army of suffering contractors, who may be wondering when, what work is presently left in the UK, will be relocated to Bangalore or Tijuana.

So if big companies aren’t planning to spend money this quarter, we have to assume that the smaller businesses Napoleon’s ‘Nation of Shopkeepers’ will be even more cautious with their spending, which is why perhaps I’m hearing from more and more IT companies that they are focusing increasingly on the public sector, which is defying the trend and spending money without restraint. The SOCITM IT Trends 2002/03 survey, based on responses from 200 Heads of ICT in councils throughout England, Scotland and Wales, found that the total estimated costs of local authorities' eGovernment programmes up to 2005 will exceed £2bn.

At a central government level, the Health Service is throwing money at IT like confetti. Government is to spend an extra £2.3bn (over the £1bn per annum it currently spends) on NHS IT over the next three years.

One fine example is The Medicines Control Agency (MCA) has outsourced its IT services in a 10-year, £50 million-plus deal - just three months before it is due to be merged into a new public body whose IT requirements are as yet unknown.

So while hospitals will receive more expensive machines that go ‘Bleep’ to place next to elderly patients on trolleys in lieu of doctors, the prospects for the remainder of the IT sector aren’t looking great this year. People keep asking me where I think the opportunities in 2003 may be and my reply, cynically enough is, that there is probably more money to be made by 'shopping' companies to the BSA for using ‘illegal’ software and collecting the £10,000 reward, than selling it to them in the first place!


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