IT spending may be more resilient than thought, if the high-powered attendees of last week’s Goldman Sachs Communacopia + Technology Conference (along with Dell and Gartner) are to be believed.
Over the course of the conference the investment bank polled 127 attendees, who included top execs from global corporations, as well as investors and analysts. The results saw 52% of respondents saying IT spending would grow more than 5% in 2023 – and more than 70% thought cloud providers would out-perform the S&P 500.
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Given the torrid time tech stocks have seen this year, this might seem a surprising conclusion.
But research from Gartner in July backs this up, with IT spend growth falling but still hanging in there, at 3% for 2022 and 6.1% for 2023, compared to 10.2% in 2021. Gartner also suggested higher tech prices – driven by the need to offer higher salaries during the ongoing talent crunch – would drive some of this growth.
This rather unexpected market sentiment was echoed by Dell co-COO Anthony Charles “Chuck” Whitten, speaking at the Goldman Sachs conference to Rod Hall, MD of Goldman’s research division.
Hall picked up on a point mentioned during Dell’s last results call: that in Q2, the firm had seen stronger performance from SMB customers compared to large enterprises. He said: "You're right, it is unusual by historical standards. Typically, small businesses are the bellwether for us, a more pervasive slowdown in spending.
"And to be clear, small and medium business growth moderated for us, moderated kind of through the quarter a little bit, but it was much more resilient compared to the large enterprise business,” Whitten added.
“What do we make of that? We're not quite sure, to be honest with you. It's -- for whatever reason, the caution that I described showed up in sort of the large corporations first or maybe only, we'll find out. I think it's kind of a reminder to us, we're on a little bit of unchartered ground here.”
Overall, though, Whitten was clear – demand remained surprisingly strong: “What we did not hear on either [client or infrastructure] business... was sort of a fundamental change in dynamics that would call into question the long-term health of our business. I would just say over the course of the quarter, we saw caution kind of enter the environment,” he added, noting deals took longer to close, with “more scrutiny of spending”.
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Like other vendors Dell is desperately trying to fulfil its order book, backed up because of component shortages – and with a perpetual question mark over how resilient those unfulfilled orders might be. But Whitten said “we don't see a lot of risk in … the stability of our backlog” nor signs customers are cancelling and re-ordering to take advantage of cheaper prices.
But while Dell, Gartner and Goldman’s conference guests were surprisingly upbeat about IT spending, Hall noted “it is a very confusing environment”, and Whitten sounded a note of caution.
“I had a lot of conversations over the last day here of teams trying to, I think, apply prior recessionary modelling to the current environment. I just don't think it's that simple anymore in this environment.”
