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Security Spending Shifts

Merrill Lynch survey: Security spending up, overall IT spending down amid broader economic concerns

Lingering concern about the overall state of the economy has many CIOs forecasting a slowdown in IT spending in 2007, according to a new survey from analyst firm Merrill Lynch.

But compliance concerns and the looming threat of organized crime online mean that security spending remains healthy.

The survey of 75 U.S. and 25 European CIOs reveals that users expect 5.2 percent spending growth in 2006 and 4.8 percent in 2007. American execs predict only 4.4 percent spending growth over the coming 12 months, compared to their more bullish international counterparts who expect 6.1 percent growth.

Merrill, however, paints a relatively rosy security picture, with execs predicting growth of 4.8 percent in their security spending this year. American CIOs, on the other hand, seem more willing to open their wallets than European execs, envisaging a 5 percent spending hike, compared to just 4.1 percent on the other side of the Atlantic.

But even with healthy security spending levels, there is a shift underway in what users are buying, according to Richard Stiennon, chief research analyst at IT-Harvest. CIOs, he adds, are no longer breaking the bank to buy traditional security technologies such as firewalls and anti-virus offerings. "There have been such massive deployments in the last few years, that it's kind of saturated," he says.

"Probably the biggest shift has been toward compliance technologies for things like reporting, storing, and archiving," explains Stiennon, with users still feeling the strain of legislation such as the Sarbanes-Oxley Act, and the Health Insurance Portability and Accountability Act (HIPAA). (See Oversight Intros SOD and Security Fears Draw VC Bucks.)

Yesterday, analyst firm Infonetics also reported that many users are looking deeper into network access and content security solutions, which is delaying some core security purchasing until later in 2006. (See Network Security Revenue Up, Security's New Maturity, Trend Intros NAC App, and Identity Engines Has NAC Solution.)

Stiennon, however, has also identified a shift in the type of threats users are facing, with organized crime a growing menace. "You will see spending on strong authentication and data protection," he predicts.

Users and analysts have identified uncertainty in the U.S. economic climate as a key factor in the overall spending slowdown. "The end of 2005 was slow, then it picked up in the spring, but now it has slowed down again," explains Dan Tanner, a member of the Storage Networking User Group of New England (SNUGNE) and founder of consulting firm ProgresSmart.

Tanner feels that a number of factors are contributing to the atmosphere of uncertainty. These include oil prices, the war in Iraq, low consumer confidence, and the lack of a clear front-runner likely to win either the Democratic or Republican party presidential nominations. "When the financial markets and big companies are paralyzed by uncertainty you get a spending slowdown," he explains.

Analyst firm IDC warned yesterday of storm clouds gathering over the U.S. economy. "Late in May stock markets seemed to plummet on a single announcement of downturn in U.S. consumer confidence," wrote John Gantz, IDC's chief research officer, in a note. "The question is, how fragile is the current booming U.S. economy?"

But it isn't all doom and gloom. Merrill Lynch, for its part, predicts a technology spending growth between 7 and 8 percent in 2006 driven largely by demand from the SMB market, which is increasingly being targeted by storage vendors. Spending on VOIP technology, it adds, will grow 4.6 percent in the same period.

— James Rogers, Senior Editor, Byte and Switch. Special to Dark Reading

Organizations mentioned in this article:

  • IDC
  • Infonetics Research Inc.
  • IT-Harvest Inc.
  • Merrill Lynch & Co. Inc.
  • Symantec Corp. (Nasdaq: SYMC)

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