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9/15/2006
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Analyst: Hardware Spending To Recover

While overall IT spending is up 6.2% this year compared to last year, hardware spending is down 1.3%, a GCR report says, although the situation will be better next year.

Hardware spending is taking a bit of a dip this year, but is expected to more than recover next year, according to a new report from GCR Custom Research.

GCR, which surveys about 100 different IT personnel weekly as part of its IT Watch service, said that while overall IT spending is up 6.2 percent this year compared to last year, hardware spending is down 1.3 percent, said Brian Smith, research director of IT Watch.

The main difference in hardware spending trends compared to those for software and services is that end-user organizations are getting more bang for their buck, Smith said.

A lot also has to do with a steep slowdown in small business IT spending. "I speculate it has to do with tightness of money," he said. "Also, small businesses are not so beholden to long spending cycles as large companies. They are more reactive, and can flex more than larger businesses."

However, Smith said, hardware spending is expected to rise 4.3 percent next year over this year, compared to an overall IT spending rise of 4.4 percent.

PDA and cell phone spending will rise fastest next year, and tablet PCs, networking and storage should all grow faster than the average, Smith said. While storage average selling prices continue to fall, rising sales volume will make up for those falls, especially in the enterprise, he said.

The big drag on hardware spending next year will be servers. "Server spending will be down 1 percent next year," he said. "Companies are getting more bang for the buck. Server virtualization is a factor in larger organizations. Falling average selling prices are also a factor."

The manufacturing and services verticals will see big increases in hardware spending next year, followed by smaller increases in construction, retail, and media, Smith said.

However, government and healthcare hardware are expected to fall next year as those verticals retrench after recent hardware investments, he said.

Government hardware spending is expected to fall 3.2 percent over this year, and services spending will fall 2.4 percent, but software spending is expected to rise 9.4 percent.

On the healthcare side, software spending should be flat and hardware spending should fall 3.4 percent. However, services spending is expected to sore 10 percent. "The healthcare sector seems to have made significant spending in hardware already, and now wants to digest it," he said.

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