Friday, March 12, 2010


Accounting for two-thirds of global IT-spending, enterprises are the real engine of technology into 2010-11. After a 14-28% collapse in 2009, a phoenix-like revival is at hand, driven by improving corporate cashflows and ageing installed hardware. We consider server virtualisation a likely success, but security and control issues are troubling cloud computing, delaying its mainstream adoption (and thus reducing the likelihood that it will disrupt a spending revival). More than 40 stocks stand to benefit.

Enterprise is the engine
Enterprises account for 65% of IT-hardware spending, 71% of telecom equipment, 85% of software and almost all of IT services.

Our analysis of global IT-spending data shows an unprecedented collapse in recent years, with enterprise-hardware expenditure down 21% YoY last year.

Unlike consumer tech, where China and Asia-Pacific are surging, North America and Western Europe account for 66% of enterprise spending. For a revival, look West.

The case for a revival
For more than five decades, corporate cashflows and profits have been useful lead indicators for IT spending - and these are now reviving.

By 2011, 84% of the installed base of enterprise-desktops will be five years old.

Delaying “PC refresh” converts capital-cost savings into higher operating expenses.

A rise in notebook replacements is encouraging (51m units in 2009; 29m in 2008).

Offshore outsourcing of IT services, such as to India, is saving US$8bn-10bn each year; this can finance 4ppts hardware-value growth, even if budgets stay flat.

The case against
Upgrading to a new operating system such as Windows 7 without a “PC refresh” carries substantially higher migration costs.

Although server virtualisation is likely to be successful, the utopian dream of cloud computing is troubled by security, compliance, control and regulatory issues.

Long list of beneficiaries
The debate over enterprise spending is the No.1 tech catalyst in 2010-11.

Enterprise-spending stocks have underperformed over recent years.

More than 40 stocks stand to benefit from an enterprise-spending revival.

To read the full report: GLOBAL TECHNOLOGY