Corporate software spending under pressure, according to
latest RBC IQ survey
Survey of corporate decision-makers shows hope for year-end improvement
SAN FRANCISCO, August 7, 2008 — Corporate software
spending is still subdued, as purchasing decision-makers who
expect their companies to spend less over the next 90 days
continue to outnumber those who expect to spend more by a
two-to-one margin. However, for the first time since last
fall, there are signs that the rate of decline in spending
is leveling off, according to the latest RBC IQ Survey of
corporate software purchasing decision-makers, released by
RBC Capital Markets at its annual North American Technology,
Media and Communications Conference being held
August 6-7 in San Francisco.
"Corporate software purchasing sentiment continues to
be flat, consistent with continued year-over-year deceleration
in IT spending metrics," said Marc Harris, RBC Capital
Markets' co-head of Global Research. "The poor business
climate, capital spending constraints and reduced need for
new software are all taking their toll on the industry, continuing
a slowdown that began last year and accelerated in 2008."
The quarterly national survey of 1,902 executives involved
with their companies' software procurement decisions found
that 25 per cent of respondents expect their companies to
spend less over the next 90 days than in the previous 90 days,
and only 12 per cent expect their companies to spend more.
Nearly half of all respondents
(44 per cent) said their company has no plans at all to purchase
software over the next 90 days, continuing a year-long downward
Security and Virtualization are the only two software categories
that appear to be weathering the storm, with both showing
signs of increased spending over the next 90 days.
Security software remains a staple for corporate IT budgets,
driven by compliance and regulation as well as by the ever-increasing
shift to conducting business via e-mail and the Internet,
as companies try to avoid the downtime and reputational risk
of security breaches.
Virtualization is a relatively young industry that is catching
the mindshare of IT departments, as a way to centralize data
that traditionally reside on the desktop, thereby improving
security, increasing utilization and lowering maintenance
Among other sectors, Business Intelligence software is being
pressured by the overall slowdown, and planned Customer Relationship
Management (CRM) software spending also appears to be weak.
Enterprise Resource Planning software is the weakest category
of all going forward, slightly lower than Document & Enterprise
Content Management Software.
The tough software environment is attributed to several factors.
Three in 10 respondents (30 per cent) say their company does
not need to purchase any new software, double the 14 per cent
who say that their corporate purchasing decisions are being
driven by the general slowdown in business and capital budgets.
In another clear sign of a challenging environment, more than
a quarter of respondents (28 per cent) say their company's
overall capital budget for the current quarter has been adjusted
downward in the past 90 days, compared to only 9 per cent
who say the budget was increased.
"While the results of this survey reflect a spending
environment consistent with last quarter, this does not necessarily
mean we are at the bottom. The next 90 days look challenging
for software manufacturers hoping to sell to corporate customers,"
said RBC Capital Markets analyst Robert Breza. "There
are some signs of a possible rebound; however, this could
be threatened by both the degrading macro environment in Europe
and Asia and uncertainties associated with the upcoming U.S.
The RBC IQ survey was conducted July 15- 31, 2008, and included
1,902 respondents. ChangeWave Research assisted RBC Capital
Markets in the survey. The margin of error was ±2 per
About RBC Capital Markets
RBC Capital Markets is the corporate and investment banking
arm of RBC and is active globally in debt origination, sales
and trading, foreign exchange, infrastructure finance, structured
products, metals and mining, and energy. Its North American
platform includes a significant U.S. middle market investment
banking franchise and leading equity, underwriting, sales,
trading and research businesses. Bloomberg ranks the firm
as the 12th-largest investment bank globally.
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