Changewave Research: 4Q 2004 Corporate IT Spending Survey

ChangeWave Research: 4Q 2004 Corporate IT Spending Survey

ChangeWave Research Report:

ASlowdown in Corporate IT Spending

Latest Survey Shows Reduction in Rate of Growth of IT Spending

for 4th Quarter; Decline in Laptop and Desktop Spending

Overview

The latest ChangeWave Alliance survey on corporate IT spending–completed September 1, 2004–shows a reduction in the rate of growth in IT spending for the 4th Quarter. The survey also shows a continuation of the downward trends reported in the previous two ChangeWave IT spending surveys, and points to a slowdown in overall economic growth for the second half of 2004. A total of628respondents involved in corporate IT spending participated in the survey.

4Q IT Spending: There was a 3-point decline in the number of respondents reporting their company will increase IT spending in the 4th Quarter. Overall, 31% of respondents say their company will increase 4Q IT spending, while 17% say spending will decrease (or there will be no spending at all). Another 47% report spending will stay the same.

Putting The Findings in Context: As the following chart shows, after five consecutive quarters of increased IT spending this is the third quarter in a row in which there has been a downturn in the rate of IT spending growth. The current survey’s +14 Net Difference Score (31% “Increase in IT Spending” minus 17% “Decrease/No IT Spending”) is the lowest recorded since June 2003.

3Q Spending: Respondents were also asked if their corporate IT spending is on track thus far in the 3rd Quarter. A total of 18% said they have spent “More than Planned,” down 1 percentage point from the previous survey – while 26% said they have spent “Less than Planned,” up 4 percentage points from the previous survey.

When respondents were asked to rate the willingness of their company to spend money on IT products and services, just under half (49%) said their company is currently giving a "Green Light" to IT spending (i.e., spending is normal). This is a 5-point drop from the previous quarter and the first decline recordedfor “Green Light” spending in two years (i.e., since 4Q 2002).

Focusing on the Future: Looking ahead to the first half of 2005 (Jan-Jun), 30% of respondents think their company's overall IT budget will be greater than second half 2004 (Jul-Dec) – but this is down 6-points from the previous survey. On a positive note, only 15% think it will be less than the second half of 2004 – a 4-point improvement from the last survey.

Individual Winners and Losers. At the individual IT subcategory level, 53% of the subcategories we track show a decline in corporate expenditures for the 4th Quarter, while 24% show an increase. This is a slight improvement from the last survey, but is still an about-face from 9 months ago when 64% of the categories registered an increase.
The largest drop-offs in spending occurred in Database Management (-6), Laptops (-5), Desktops (-3), Application Server Software (-3), PDAs (-3), Server Security (-3) and Backup/Recovery Software (-3). In particular, this is the third survey in a row that Desktops registered a decline and the second survey in a row for Laptops – a clear signal that the corporate PC upgrade cycle peaked back in the 1st Quarter and has since been in decline.

There are still some IT sweet spots, however: VoIP (+2) and Customer Resource Management software (+2) registered the largest 4th Quarter spending improvements.
Bottom Line: These 4Q IT Spending survey results show a continuation of the downward trends reported in the previous two IT spending surveys, and point to a slowdown in overall economic growth for the second half of 2004. Above and beyond a reduction in the 4Q IT spending growth rate and in customer “green light” spending, the survey results also show lower-than-planned IT expenditures thus far in the 3rd Quarter.

At the IT subcategory level, the current survey shows clear evidence of the continuing decline in corporate IT expenditures for Desktops and Laptops.

The ChangeWave Alliance is a group of 4,700 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

Table of Contents

Summary of Key Findings...... 4

Chart One: 4th Quarter 2004 IT Spending...... 4

Last Thirteen IT Spending Surveys: A Comparison...... 5

Chart Two: Last 13 IT Spending Surveys...... 5

Future Spending...... 5

Chart Three: Willingness of Company to Spend on IT...... 5
Chart Four: Willingness to Spend – A Comparison...... 6

A Closer Look at 2005...... 6

Chart Five: IT Budget for 1st Half 2005...... 6

“Must Have” IT Spending...... 7

Chart Six: IT Spending Breakdown for 2nd Half 2004...... 7
Chart Seven: IT Spending Breakdown for 1st Half 2005...... 7

Spending So Far in 3rd Quarter...... 8

Chart Eight: Actual IT Spending Thus Far in 3Q...... 8

New Technologies...... 11

IT Spending Subcategories for 4th Quarter...... 15

ChangeWave Research Methodology...... 26

About ChangeWave Research...... 27

I. Summary of Key Findings

The latest ChangeWave Alliance survey on corporate IT spending shows a further slowdown in the rate of growth in IT spending for the 4th Quarter. The survey, conducted August 24 – September 1, 2004, shows a continuation of the downward trends reported in the previous two IT spending surveys, and points to a likely easing in growth for the second half of 2004. A total of628members participated in the survey.

There was a 3-point decline in the number of members saying their company will be increasing IT spending in the 4th Quarter. Overall, 31% of Alliance members report their company will increase 4Q IT spending while 17% say spending will decrease (or there will be no spending at all). Another 47% report 4Q IT spending will remain the same.

Putting The Findings in Context: As the following chart shows, after five consecutive quarters of increased IT Spending this is the third quarter in a row in which there has been a slowing rate of IT spending growth. The current survey’s +14 Net Difference Score (31% “Increase in IT Spending” minus 17% “Decrease/No IT Spending”) is the lowest recorded since June 2003.

“Green Light” Spending. Focusing on the immediate future, we asked respondents to rate the current willingness of their company to spend money on IT products and services. Just under one-half (49%) said their company is currently giving a "Green Light" to IT spending (i.e., spending is normal).

This is a 6-point drop from the previous quarter and the first decline recordedfor “Green Light” spending in two years (since 4Q 2002).

Another 36% said their company has given a “Yellow Light" (i.e., spending is downsized, though not completely stopped), and 10% said their company has given a "Red Light" to IT spending (i.e., spending is on hold).

Looking Ahead to the First Half of 2005(Jan-Jun), 30% of respondents think their company's overall IT budget will be greater than the second half of 2004 (Jul-Dec) - down 6-points from the previous survey. However, on a positive note, only 15% think it will be less than the second half of 2004 – a 4-point improvement from the last survey.

“Must Have” IT Spending in 4th Quarter

There is a slight shift away from “must have” (i.e., basic maintenance/replacement) IT spending and towards discretionary IT spending – a positive sign. Note that in Chart 6 above, 55% of respondents say their company will spend more than half of their IT dollars on basic maintenance/replacement during the 2nd half of 2004 (i.e., 21% + 18% + 16%) – which is 3-percentage points less than an equivalent question asked in our previous survey.
In Chart 7 below, this figure is 49% for the 1st half of 2005 (i.e., 21% + 15% + 13%), seven-percentage points less than in the previous survey – another positive sign.

Spending So Far in 3rd Quarter

We asked respondents three questions on planned vs. actual 3Q IT Spending to date:

(1)Question Asked:We’re halfway through the 3rd Quarter.Based upon your IT Spending plans of three months ago, have you spent more than planned, less than planned, or the same as planned on IT products and services thus far in the 3rd Quarter?

We asked respondents if their corporate IT spending is on track thus far in the 3rd Quarter, and found spending for the quarter to be lower than originally expected. A total of 18% said they have spent “More than Planned,” down 1 percentage point from the previous survey – while 26% said they have spent “Less than Planned,” up 4 percentage points from the previous survey. (Chart 8)

(2) Question Asked: For which of the following main IT Spending categories - if any - have you spent more than planned thus far in the 3rd Quarter? (Check All That Apply)

Security / 14%
Software: Application Development / 11%
PCs / 11%
Networking / 9%
Software: Enterprise Applications / 8%
Servers / 8%
Outsourced Services / 7%
Storage / 7%
Communications / 5%
Software: Platforms / 4%
Don't Know / 15%

(3) Question Asked: And for which of the following main IT Spending categories - if any - have you spent less than planned thus far in the 3rd Quarter? (Check All That Apply)

PCs / 19%
Servers / 10%
Software: Application Development / 10%
Software: Enterprise Applications / 9%
Outsourced Services / 9%
Storage / 8%
Networking / 8%
Communications / 7%
Software: Platforms / 7%
Security / 5%
Don't Know / 17%

Net Difference Score – Current Survey (August 2004)

Overall IT Spending Categories / Spent More Than Planned in 3Q / Spent Less Than Planned in 3Q / Net Difference Score
Security / 14% / 5% / +9
Networking / 9% / 8% / +1
Software: Application Development / 11% / 10% / -1
Software: Enterprise Applications / 8% / 9% / -1
Storage / 7% / 8% / -1
Outsourced Services / 7% / 9% / -2
Servers / 8% / 10% / -2
Communications / 5% / 7% / -2
Software: Platforms / 4% / 7% / -3
PCs / 11% / 19% / -8

Security (Net Difference Score = +9) remains at the top of the list of 3Q IT spending categories for which member companies have spent more than planned. On the down side, PCs (-8) lead the list of 3Q IT spending categories for which member companies have spent less than planned.

Overall, the results of these three questions suggest 3Q IT Spending to be somewhat lower than originally anticipated thus far into the quarter.

New Technologies

(1) Question Asked: “Above and beyond the IT spending categories mentioned in this survey - what is the most important new technology or product category that is being seriously tested or deployed by your company?”

(n=280)

Current
Survey
Sep ‘04 / Previous
Survey
Jun ‘04
VOIP / 17% / 15%
Wireless / 11% / 14%
Web Based Software/Services / 9% / 9%
Software / 5% / NA
Security / 4% / 10%
Enterprise Applications Software / 4% / NA
Network / 3% / NA
Medical Technologies / 3% / NA
Database / 3% / NA
Operating System / 3% / NA
RFID / 3% / 2%
Storage / 3% / NA
Servers / 3% / 5%
PDA/Handheld Devices / 2% / 3%
Outsourcing / 2% / NA
Microsoft.NET / 1% / 1%
E-mail Services / 1% / NA
LCD/Flat Panel Displays / 1% / NA
Other / 10% / 19%
None / 14% / 14%

(2) Question Asked: “Finally, the Sarbanes-Oakley Act (SOX) requires companies to comply with new SOX-related controls and procedures to meet their financial auditing requirements. Is your company currently purchasing or already deploying software to comply with Sarbanes-Oakley requirements?”

Yes, Currently Purchasing SOX-related Software / 4%
Yes, Already Deploying SOX-related Software / 6%
No / 55%
Don’t Know/No Answer / 36%

Only 6% of respondents say they are already deploying software to comply with new Sarbanes-Oakley (SOX) related controls and procedures. Another 4% say they are currently purchasing SOX-related software.

(2A) Question Asked: “Which vendor makes the Software you are currently purchasing/already deploying?”

(n=52)

Microsoft / 25%
Oracle / 6%
PeopleSoft / 6%
Apple / 6%
SAP / 6%
IBM / 4%
JD Edwards / 2%
Other / 50%
Don’t Know / 6%

Part II. IT Spending Subcategories for 4th Quarter

Table One: WINNING Subcategories – Largest Projected 4Q Spending Increases

WINNERS / (A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
I. Communications
(a)VoIP Systems
Nov2003 / 9% / 0% / 9% / --
Feb2004 / 12% / 0% / 12% / 3%
June2004 / 11% / 1% / 10% / -2%
Sept2004 / 13% / 1% / 12% / 2%
II. Software: Enterprise Applications:
(a) Customer Resource Management
June2003 / 8% / 2% / 6% / 2%
Sept2003 / 8% / 3% / 5% / -1%
Nov2003 / 10% / 1% / 9% / 4%
Feb2004 / 11% / 2% / 9% / --
June2004 / 8% / 3% / 5% / -4%
Sept2004 / 9% / 2% / 7% / 2%
III. Outsourced Services
(a)Outsourced DataCenter Services
Nov2003 / 4% / 2% / 2% / --
Feb2004 / 4% / 1% / 3% / 1%
June2004 / 3% / 3% / 0% / -3%
Sept2004 / 4% / 1% / 3% / 3%
(b) Outsourced Contract Programming
June2003 / 8% / 6% / 2% / 3%
Sept2003 / 7% / 5% / 2% / --
Nov2003 / 8% / 3% / 5% / 3%
Feb2004 / 6% / 4% / 2% / -3%
June2004 / 7% / 4% / 3% / 1%
Sept2004 / 8% / 3% / 5% / 2%

Table Two: LOSING Subcategories – Largest Projected 4Q Spending Decreases

LOSERS / (A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
I. Software: Platforms
(a) Database Management
June2003 / 15% / 2% / 13% / 4%
Sept2003 / 16% / 2% / 14% / 1%
Nov2003 / 13% / 1% / 12% / -2%
Feb2004 / 13% / 2% / 11% / -1%
June2004 / 16% / 2% / 14% / 3%
Sept2004 / 10% / 2% / 8% / -6%
(b) Application Server Software
June2003 / 13% / 2% / 11% / 3%
Sept2003 / 17% / 2% / 15% / 4%
Nov2003 / 9% / 1% / 8% / -7%
Feb2004 / 8% / 1% / 7% / -1%
June2004 / 7% / 1% / 6% / -1%
Sept2004 / 4% / 1% / 3% / -3%
II. PCs
(a) Laptops
June2003 / 25% / 3% / 22% / 4%
Sept2003 / 31% / 5% / 26% / 4%
Nov2003 / 35% / 1% / 34% / 8%
Feb2004 / 37% / 2% / 35% / 1%
June2004 / 34% / 3% / 31% / -4%
Sept2004 / 29% / 3% / 26% / -5%
(b) Desktops
June2003 / 27% / 6% / 21% / 1%
Sept2003 / 29% / 9% / 20% / -1%
Nov2003 / 30% / 7% / 23% / 3%
Feb2004 / 30% / 8% / 22% / -1%
June2004 / 27% / 9% / 18% / -4%
Sept2004 / 23% / 8% / 15% / -3%
(c) PDAs
June2003 / 6% / 3% / 3% / 1%
Sept2003 / 7% / 2% / 5% / 2%
Nov2003 / 7% / 2% / 5% / --
Feb2004 / 6% / 2% / 4% / -1%
June2004 / 7% / 2% / 5% / 1%
Sept2004 / 4% / 2% / 2% / -3%
LOSERS
(CONT’D) / (A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
II. Security
(a) Backup/Recovery Software
June2003 / 10% / 1% / 9% / --
Sept2003 / 15% / 1% / 14% / 5%
Nov2003 / 15% / 1% / 14% / --
Feb2004 / 17% / 1% / 16% / 2%
June2004 / 17% / 1% / 16% / --
Sept2004 / 14% / 1% / 13% / -3%
(b) Server Security
Nov2003 / 18% / 0% / 18% / --
Feb2004 / 17% / 0% / 17% / -1%
June2004 / 17% / 0% / 17% / --
Sept2004 / 14% / 0% / 14% / -3%
IV. Outsourced Services
(b) Outsourced Applications Development
June2003 / 6% / 3% / 3% / 3%
Sept2003 / 7% / 4% / 3% / --
Nov2003 / 7% / 3% / 4% / 1%
Feb2004 / 7% / 2% / 5% / 1%
June2004 / 8% / 3% / 5% / --
Sept2004 / 5% / 3% / 2% / -3%

Table Three: IT Subcategories with LITTLE TO NO CHANGE in Projected 4Q Spending

LITTLE TO
NO CHANGE / (A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
I. Software: Enterprise Applications:
(a) Business Intelligence and Reporting
Nov2003 / 9% / 1% / 8% / --
Feb2004 / 10% / 2% / 8% / --
June2004 / 8% / 1% / 7% / -1%
Sep2004 / 9% / 1% / 8% / 1%
(b) Supply Chain Management/Procurement
June2003 / 4% / 2% / 2% / 1%
Sept2003 / 6% / 2% / 4% / 2%
Nov2003 / 8% / 3% / 5% / 1%
Feb2004 / 7% / 2% / 5% / --
June2004 / 7% / 3% / 4% / -1%
Sept2004 / 6% / 3% / 3% / -1%
(c) Enterprise Resource Planning (ERP)
June2003 / 5% / 4% / 1% / 1%
Sept2003 / 6% / 2% / 4% / 3%
Nov2003 / 7% / 2% / 5% / 1%
Feb2004 / 8% / 2% / 6% / 1%
June2004 / 7% / 3% / 4% / -2%
Sept2004 / 6% / 3% / 3% / -1%
II. Software: Platforms
(a) Legacy Platforms
Nov2003 / 2% / 9% / -7% / --
Feb2004 / 3% / 9% / -6% / 1%
June2004 / 3% / 11% / -8% / -2%
Sept2004 / 2% / 9% / -7% / 1%
(b) Document and Content Management
Nov2003 / 7% / 1% / 6% / --
Feb2004 / 7% / 1% / 6% / --
June2004 / 5% / 1% / 4% / -2%
Sept2004 / 7% / 2% / 5% / 1%
(c) Data Storage and Management
June2003 / 12% / 2% / 10% / -3%
Sept2003 / 11% / 1% / 10% / --
Nov2003 / 14% / 0% / 14% / 4%
Feb2004 / 15% / 1% / 14% / --
June2004 / 11% / 1% / 10% / -4%
Sept2004 / 11% / 1% / 10% / --
LITTLE TO
NO CHANGE
(CON’T) / (A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
(d) Portal and E-Business Development
Nov2003 / 7% / 2% / 5% / --
Feb2004 / 9% / 2% / 7% / 2%
June2004 / 7% / 1% / 6% / -1%
Sept2004 / 7% / 1% / 6% / --
(e) Network Management
Nov2003 / 8% / 1% / 7% / --
Feb2004 / 8% / 1% / 7% / --
June2004 / 8% / 1% / 7% / --
Sept2004 / 7% / 1% / 6% / -1%
III. Software: Application Development
(a) Java
June2003 / 6% / 2% / 4% / --
Sept2003 / 7% / 3% / 4% / --
Nov2003 / 8% / 2% / 6% / 2%
Feb2004 / 7% / 2% / 5% / -1%
June2004 / 7% / 2% / 5% / --
Sept2004 / 7% / 1% / 6% / 1%
(b) XML
June2003 / 9% / 1% / 8% / 1%
Sept2003 / 8% / 1% / 7% / -1%
Nov2003 / 7% / 1% / 6% / -1%
Feb2004 / 5% / 1% / 4% / -2%
June2004 / 5% / 1% / 4% / --
Sept2004 / 5% / 1% / 4% / --
(c) Middleware
Nov2003 / 4% / 1% / 3% / --
Feb2004 / 2% / 1% / 1% / -2%
June2004 / 4% / 2% / 2% / 1%
Sept2004 / 2% / 1% / 1% / -1%
(d) Microsoft .NET
Nov2003 / 12% / 2% / 10% / --
Feb2004 / 8% / 2% / 6% / -4%
June2004 / 7% / 2% / 5% / -1%
Sept2004 / 6% / 2% / 4% / -1%
(e) CASE/Application Management
Nov2003 / 2% / 3% / -1% / --
Feb2004 / 2% / 1% / 1% / 2%
June2004 / 3% / 1% / 2% / 1%
Sept2004 / 2% / 2% / 0% / -2%
LITTLE TO
NO CHANGE
(CON’T) / (A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
IV. Servers
(a) Servers - Non-Intel Based
Nov2003 / 2% / 4% / -2% / --
Feb2004 / 2% / 3% / -1% / 1%
June2004 / 3% / 3% / 0% / 1%
Sept2004 / 3% / 3% / 0% / --
(b) Blade Servers
June2003 / 2% / 1% / 1% / --
Sept2003 / 4% / 1% / 3% / 2%
Nov2003 / 3% / 1% / 2% / -1%
Feb2004 / 3% / 0% / 3% / 1%
June2004 / 3% / 1% / 2% / -1%
Sept2004 / 3% / 1% / 2% / --
(c) Servers - Intel Based
Nov2003 / 18% / 2% / 16% / --
Feb2004 / 20% / 2% / 18% / 2%
June2004 / 17% / 3% / 14% / -4%
Sept2004 / 15% / 2% / 13% / -1%
(d) Server OS – Unix
Nov2003 / 6% / 4% / 2% / --
Feb2004 / 5% / 4% / 1% / -1%
June2004 / 5% / 4% / 1% / --
Sept2004 / 4% / 4% / 0% / -1%
(e) Server OS – Windows
Nov2003 / 11% / 2% / 9% / --
Feb2004 / 11% / 2% / 9% / --
June2004 / 11% / 2% / 9% / --
Sept2004 / 9% / 2% / 7% / -2%
(f) Server OS – Linux
Nov2003 / 10% / 1% / 9% / --
Feb2004 / 11% / 1% / 10% / 1%
June2004 / 9% / 1% / 8% / -2%
Sept2004 / 7% / 1% / 6% / -2%
V. Networking
(a)VPN/Remote Networks
Nov2003 / 10% / 1% / 9% / --
Feb2004 / 11% / 0% / 11% / 2%
June2004 / 8% / 1% / 7% / -4%
Sept2004 / 8% / 1% / 7% / --
LITTLE TO
NO CHANGE
(CON’T) / (A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
(b) Advanced Ethernet Switches
Nov2003 / 3% / 1% / 2% / --
Feb2004 / 2% / 1% / 1% / -1%
June2004 / 3% / 1% / 2% / 1%
Sept2004 / 3% / 1% / 2% / --
(c) Switches, Hubs, Routers
June2003 / 16% / 2% / 14% / 1%
Sept2003 / 17% / 3% / 14% / --
Nov2003 / 14% / 1% / 13% / -1%
Feb2004 / 18% / 1% / 17% / 4%
June2004 / 13% / 1% / 12% / -5%
Sept2004 / 12% / 2% / 10% / -2%
(d) Edge Routers
June2003 / 2% / 1% / 1% / --
Sept2003 / 4% / 1% / 3% / 2%
Nov2003 / 3% / 0% / 3% / --
Feb2004 / 2% / 1% / 1% / -2%
June2004 / 3% / 1% / 2% / 1%
Sept2004 / 1% / 1% / 0% / -2%
(e) Wireless
Feb2003 / -- / -- / -- / --
June2003 / 15% / 0% / 15% / --
Sept2003 / 14% / 1% / 13% / -2%
Nov2003 / 15% / 0% / 15% / 2%
Feb2004 / 16% / 0% / 16% / 1%
June2004 / 17% / 1% / 16% / --
Sept2004 / 14% / 0% / 14% / -2%
VI. Security
(a) Web/Network Security
Nov2003 / 17% / 1% / 16% / --
Feb2004 / 20% / 1% / 19% / 3%
June2004 / 17% / 0% / 17% / -2%
Sept2004 / 18% / 0% / 18% / 1%
(b) Disaster Recovery Software/Services
June2003 / 7% / 2% / 5% / -1%
Sept2003 / 8% / 2% / 6% / 1%
Nov2003 / 9% / 1% / 8% / 2%
Feb2004 / 7% / 1% / 6% / -2%
June2004 / 8% / 1% / 7% / 1%
Sept2004 / 8% / 1% / 7% / --
(A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
(c) Desktop Security
Nov2003 / 15% / 1% / 14% / --
Feb2004 / 15% / 1% / 14% / --
June2004 / 14% / 1% / 13% / -1%
Sept2004 / 11% / 0% / 11% / -2%
(d) Enterprise Security
Nov2003 / 13% / 0% / 13% / --
Feb2004 / 11% / 0% / 11% / -2%
June2004 / 10% / 0% / 10% / -1%
Sept2004 / 8% / 0% / 8% / -2%
VII. Storage
(a) Large Centralized Hardware Systems (Mainframe)
June2003 / 1% / 4% / -3% / --
Sept2003 / 1% / 4% / -3% / --
Nov2003 / 2% / 4% / -2% / 1%
Feb2004 / 2% / 3% / -1% / 1%
June2004 / 2% / 6% / -4% / -3%
Sept2004 / 1% / 3% / -2% / 2%
(b) Tape/Archival Subsystems
Feb2003 / -- / -- / -- / --
June2003 / 2% / 4% / -2% / --
Sept2003 / 4% / 2% / 2% / 4%
Nov2003 / 5% / 5% / 0% / -2%
Feb2004 / 4% / 5% / -1% / -1%
June2004 / 5% / 6% / -1% / --
Sept2004 / 4% / 4% / 0% / 1%
(c) Network Attached Storage (NAS)/ Distributed Systems
June2003 / 5% / 1% / 4% / -4%
Sept2003 / 8% / 1% / 7% / 3%
Nov2003 / 10% / 1% / 9% / 2%
Feb2004 / 11% / 1% / 10% / 1%
June2004 / 10% / 1% / 9% / -1%
Sept2004 / 10% / 1% / 9% / --
(d) Storage Area Networks (SANs) Equipment
June2003 / 8% / 1% / 7% / --
Sept2003 / 8% / 1% / 7% / --
Nov2003 / 11% / 1% / 10% / 3%
Feb2004 / 10% / 1% / 9% / -1%
June2004 / 9% / 1% / 8% / -1%
Sept2004 / 7% / 1% / 6% / -2%
(A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
VIII. Communications
(a)Telecom Management Software
Nov2003 / 3% / 1% / 2% / --
Feb2004 / 3% / 1% / 2% / --
June2004 / 2% / 2% / 0% / -2%
Sept2004 / 2% / 1% / 1% / 1%
(b) CallCenter Management Software
Nov2003 / 4% / 1% / 3% / --
Feb2004 / 2% / 1% / 1% / -2%
June2004 / 3% / 3% / 0% / -1%
Sept2004 / 2% / 1% / 1% / 1%
(c) Video Conferencing
June2003 / 5% / 2% / 3% / --
Sept2003 / 5% / 2% / 3% / --
Nov2003 / 7% / 2% / 5% / 2%
Feb2004 / 10% / 2% / 8% / 3%
June2004 / 8% / 3% / 5% / -3%
Sept2004 / 7% / 2% / 5% / --
(d) Wireless Telecom
June2003 / 7% / 2% / 5% / -3%
Sept2003 / 8% / 1% / 7% / 2%
Nov2003 / 14% / 1% / 13% / 6%
Feb2004 / 13% / 1% / 12% / -1%
June2004 / 14% / 2% / 12% / --
Sept2004 / 12% / 1% / 11% / -1%
(e) Email Management Software
Nov2003 / 6% / 1% / 5% / --
Feb2004 / 6% / 1% / 5% / --
June2004 / 7% / 1% / 6% / 1%
Sept2004 / 5% / 1% / 4% / -2%
IX. PCs
(a) Flat-Panel Displays
June2003 / 14% / 2% / 12% / --
Sept2003 / 18% / 2% / 16% / 4%
Nov2003 / 19% / 1% / 18% / 2%
Feb2004 / 23% / 1% / 22% / 4%
June2004 / 18% / 1% / 17% / -5%
Sept2004 / 18% / 1% / 17% / --
(A) Percent
Upgrading/
Buying
for 1st Time / (B) Percent
Downgrading/
Phasing Out / (C) Net %
Change Score
(A-B) / (D) Percentage
Point Change
From Previous Survey
(b) PC Accessories
Nov2003 / 3% / 1% / 2% / --
Feb2004 / 6% / 2% / 4% / 2%
June2004 / 3% / 1% / 2% / -2%
Sept2004 / 4% / 2% / 2% / --
(c) PC Operating Systems
June2003 / 6% / 2% / 4% / 1%
Sept2003 / 8% / 3% / 5% / 1%
Nov2003 / 9% / 1% / 8% / 3%
Feb2004 / 10% / 2% / 8% / --
June2004 / 8% / 1% / 7% / -1%
Sept2004 / 7% / 1% / 6% / -1%
(d) MS Office
Nov2003 / 7% / 1% / 6% / --
Feb2004 / 11% / 2% / 9% / 3%
June2004 / 9% / 1% / 8% / -1%
Sept2004 / 8% / 1% / 7% / -1%
(e) Printers
Nov2003 / 9% / 1% / 8% / --
Feb2004 / 10% / 2% / 8% / --
June2004 / 9% / 3% / 6% / -2%
Sept2004 / 8% / 3% / 5% / -1%
X. Outsourced Services
(a) Outsourced IT Mgmt
June2003 / 5% / 4% / 1% / 1%
Sept2003 / 7% / 4% / 3% / 2%
Nov2003 / 6% / 3% / 3% / --
Feb2004 / 5% / 3% / 2% / -1%
June2004 / 6% / 3% / 3% / 1%
Sept2004 / 6% / 3% / 3% / --

III. ChangeWave Research Methodology

These findings are based on a survey of ChangeWave Alliance members conducted online between August 24 – September 1, 2004. The goal of the survey was to get an up-to-date picture of IT spending for the 4th Quarter of 2004. To this end, the survey was composed of a sample of 628 accredited Alliance members who are involved with IT spending in their organization.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (58%) have advanced degrees (e.g., Master’s or Ph.D.) and 94% have at least a four-year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

IV. About ChangeWave Research

ChangeWave Research, a subsidiary of Phillips Investment Resources, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 4,700-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy - well in advance of other available sources. ChangeWave surveys its 4,700 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

For More Information:

ChangeWave ResearchTelephone: 301-279-4200

9420 Key West AvenueFax: 301-610-5206

Rockville, MD20850

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