1992 U.S. IT spending outlook: more optimism than 1991 - information technology - includes related articles

Once again, the U.S. IT industry perseveres in a weak economy. Expanding roughly at the rate of inflation, the IS community plans to sustain its commitment to information technology through conservative spending practices and cautions new implementation strategies.

As in the past, IDC has chosen to study IS behavior by compiling a mixture of quantitative and qualitative information depicting both tactical and strategic directions. In the fourth quarter of 1991, we conducted some 1,600 in-dept interviews with IS executives in the United States. This research produced the following major findings and conclusions:

* The extent to which this mild planned uptick actually takes place will be highly dependent on the performance of the overall economy.

* Despite these modest plans, the composition of spending continues to churn. Migration to more modern hardware and software platforms was rated as the single most important task by the survey base.

* IS executives continue to be open to new technologies with more than 80% inclined to use new technologies to improve their IS operations. Overall, interest is highest in workstations, EDI, CD/ROM, multiprotocol routers and software tools such as CASE.

* Roughly 30% of the survey base is moving toward a client/server architecture. Significantly, understanding of this term has increased markedly. Only 15% of U.S. customers consider the term to be a mere buzzword, down from 28% in last year's survey.

* Roughly half of the sites surveyed are pursuing an open systems strategy, although their means of achieving this aim can vary widely. About one-third of the sites are pursuing a Unix-oriented strategy.

* Interest in systems integration continues to increase with more than 20% of the base either using or considering such an option. Outsourcing remains of significant interest to large mainframe customers.

* DOS and DOS/Windows-based PCs continue to gain strength. With the exception of the DEC environment, there is still little commitment to the Apple MacIntosh among the MIS community. On the other hand, use of MS-Windows continues to expand. By the end of 1992, 44% of all PCs in the survey base will be running a version of Windows, up from 25% in 1991. On a less optimistic note, the 1992 market for PC hardware is expected to remain flat

* Use of local area networking continues to increase. By the end of 1992 some 60% of all PCs at these sites will on a LAN, up from 44% today. Novell continues to be the overwhelming supplier of choice, capturing two-thirds of all sites that have made a strategic LAN decision.

* The most important uses of internal IS staff are for systems/network maintenance and developing new applications. Not surprisingly, the two most important areas of required training are (1) internal standards and procedures and (2) operating systems and network management. These areas greatly outweigh the need for training in Unix, client/server architectures and CASE.

More detailed analysis follows.

Estimated 1991/92 IS Spending Growth

Total IS spending grew somewhat less than expected in 1991, with growth estimated at 3%, while the customer base last year anticipated a 4.8% growth. Most likely, this 1.5% drop can be explained by a worse than expected economy.

This year, the base again expects to grow at just under 5%. Some 45% of the sites are forecasting an increase; 15% are planning to decrease spending with the remainder expecting to change. Some 8% of all sites in the U.S. characterize themselves as being in an environment of long term contraction.

Current Budget Allocation

The proportion of the total budget allocated to IS personnel is roughly equal to the combined budgets for multiuser and PC/workstation hardware. Collectively, hardware and IS staff account for two-thirds of total IS budgets. The remaining third is distributed among packaged software, services, networking and all other costs.

Although positive growth is anticipated an all product/service areas, the increases are consistently modest. The most active areas are expected to be end-user products such as PCs, workstations, and servers, as well as packaged software.

Most Important Challenge for 1992

The most important challenge for 1992 will be migrating from older systems to more modern hardware/software platforms. This factor rated slightly higher than controlling costs or integrating central and end-user resources, and much higher than recruiting and retaining top-quality staff.

These priorities vary somewhat by host environment. IBM mainframe and AS400/System 3X sites are more concerned with controlling costs, while DECVAXVMS sites are focusing more on integrating central and end user resources into a single enterprise information system. Not surprisingly, the highest levels of migration interest are found in the other mini and other mainframe sectors.

Acceptance of New Technologies

Acceptance of new technologies also varies widely among host environments, but overall, EDI, workstations, CD/ROM, and software tools such as CASE and object-oriented programming scored very well. Interest in multimedia applications and image processing may gain momentum in 1992, as suggested by the significant "exploratory" responses, especially from the large IBM mainframe sites.

Overall IT Investment Strategy

The question of system downsizing/uprising/rigthsizing has become an increasingly important part of a customer's investment decision making. IDC's research shows a clear but not overwhelming movement to smaller platforms in 1992.

More than half of the sites expect to maintain their curent mix of central and distributed systems. On the other hand, 18% are consciously moving applications off centralized hosts onto small platforms, whereas only 8% are upsizing distributed applications onto a larger host. Additionally, 20% of the sites are focusing most new application development on small systems.

An equally important question has to do with the balance of hardware and software spending within individual customer sites. Here also the data support the conventional wisdom that future investment will be geared less to hardware and more to software and services, but not the extent that many have suggested.

About 25% of all sites expect to continue to invest heavily in hardward, software, and services; 24% will focus mainly on software and services, and just 15% mainly on hardware. The remaining sites are either flat or contracting.

Technology Implementation

Along with new technology comes changing patterns of implementation as the IT industry moves through new generations of computing. Some of the most frequently discussed topics in the IT industry today are those of client/server architectures, open systems strategies, outsourcing, and systems integration.

In general, the least enthusiasm for these new approaches comes from IBM AS400/System 3X customers, while the IBM mainframe and Unix environments tend to be the most aggressive in terms of their plans for new computing schemes. The highlights of this implementation research are outlined below.

Client/Server

* Use of client/server computing continues to be most prominent in Unix environments, IBM mainframe sites, and DEC VMS sites, while As400/System 3X sites remain the least interested in this approach.

* IS professionals seem to be gaining a better understanding of the term "client/server." The number of sites labeling the term a "buzzword whose meaning is not at all clear" is down sharply from last year's survey. However, better understanding does not necessarily translate into more migration, as many customers continue to take a wait-and-see attitude.

* Most customers see a client/server architecture as an enterprisewide endeavor, as opposed to a LAN-based solution. They also see clien/server systems used for a roughly equal mix of office automation and mission-critical applications.

Open Systems

* Implementation of an open systems strategy received mixed reviews showing an even split for and against pursuing such a strategy.

* The most pronounced deviation from the mean came from the IBM AS400/System 3X environment, with only 28% of this customer base pursuing an open systems approach.

* Not surprisingly, Unix sites overwhelmingly show the most positive results.

* The means of implementing an open systems strategy vary widely among senior system environments. The most common response was to adopt a standardized operating system. However, IBM 270/390 and VAX VMS sites are more likely to use common development tools, programming languages, and database software to implement an open systems plan.

* IBM mainframe sites, including 4381 sites, are also more likely than any other senior system environment to move to an open systems strategy via enterpriseswide communication system.

Outsourcing

* Outsourcing continues to gain attention, with the survey results indicating relatively low usage levels, but relatively high levels of consideration, especially within the larger mainframe sites. IBM S/370 sites are still the general interest in outsourcing extends to both the data center and corporate network environment.

Systems Integrators

* Use of systems integrators is also on the rise, with the appeal spread fairly equally across the major host environments studied. Overall, about 25% of the base is either considering or currently using systems integration services.

* Of those sites considering the use of systems integrators, the larger mainframe sites tend to see the systems integrator's role as one that can be called upon the provide limited one-time or project-based assistance, while the smaller minicomputer sites are more likely to use system integrators for most or all major IS activities.

* Customers report that cost had little to do with the rejection of a systems integration strategy. The most common reason cited for not using a systems integrator is customer satisfaction with existing resources and services.

PC and Workstation Purchase Growth

Consistent with previous IDC estimates, this year's IT survery shows that PC unit purchase growth will remain flat in 1992 compared to 1991. However, the overall budget for PCs, workstations and servers is expected to expand as users upgrade their hardware and try to get more out of their investment. The survey suggests that unit increases will come primarily from VAX VMS and other mini environments.

PC Saturation Levels

The size of the site appears to have some correlation with PC saturation levels. Smaller minicomputer and Unix sites are more likely to have reached some level of PC and workstation saturation than are the larger mainframe sites.

Perhaps the most interesting finding in this area is the strong interest in workstations and the surprisingly low commitment to the Apple MacIntosh. In fact, with the single exception of the Digital accounts, only about 2% of the sites surveyed are increasing their commitment to the Apple platform. Digital accounts are also the only ones where Apple's PC share is more than 10%. Apple still has a long way to go to win the support of the IS community.

PC Operating Systems

Over half of the customer base has chosen to standardize on a single PC operating system. Among those who have decided, over 90% are standardizing on either DOS or DOS/Windows.

Indeed, use of Windows is growing rapidly. By the end of 1992 over 40% of the installed base of business PCs will be running Windows, up from 25% at the end of 1991 (Figure 80). In contrast, fewer than 1% of the sites have standarized on the Apple MacIntosh platform.

Local Area Networks

Local area networks are becoming an increasingly important part of IS activities. Some 60% of the PCs within the survey base are attached to a LAN, up from 44% in 1991. Only within the AS/400 group is the percentage of PCs on a LAN less than 50%.

Not surprisingly, Novell, with more than three times the installations of any other competitor, is by far the dominat LAN software vendor. Some two-thirds of those companies that have made a strategic commitment to a LAN operating system chose Novell, more than four times that of its nearest competitor, IBM.

Software And Application Development

This part of the survey focused on the utilization and requirements for existing internal staff. It also examined the expected balance between internal and external software development spending.

Allocation of Software Spending

The allocation of software spending among internal vs. external resources appears to be roughly the same as it has been in the past five years, according to survey results. In general, about half the spending activity is internal and half external.

Interestingly, AS/400 customers are most prone to develop software internally, with two-thirds of all software spending geared to internal development.

IS Staff utilization and training

The areas that consume the greatest proportion of staff time are systems/network maintenance and the development of new applications. The remaining proportion is spread roughly equally across tasks like systems conversion, providing end-user access and building new user interfaces.

Perhaps the most interesting variation by host environment is the relatively high proportion of time that Digital and Unix sites spend developing new applications compared to systems software and network maintenance.

In terms of managing this large investment in IS personnel and meeting their software challenges, customers are primarily focused on improving their internal standards and procedures. This need was followed closely by improving skills in operating systems and network management.

In contrast, emerging technologies such as CASE and object-oriented programming were described as not important by roughly 50% of the survey base. Training in open systems and client/server architectures is also a matter of lesser importance.

COPYRIGHT 1992 International Data Corporation
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