When Tech Spending Slows Down, Hug Your Vendor

By Larry Dignan Print this article Print

Opinion: Tech spending seems to be at least hitting a speed bump. With vendors struggling, it may make sense to squeeze them on price.

It may be time to give your vendor a squeeze—and not the affectionate kind.

With the second-quarter earnings season in full bloom, it's becoming clear that there are a few potholes in technology spending.

Sales cycles are getting longer. Growth forecasts are coming down. What's it mean for you? Potentially, some leverage.

All customers should know the health of their key vendors, because there could be a buyer's market emerging.

It's too early to gauge exactly how much leverage customers could garner, but it's worth monitoring.

Recent developments to ponder:

  • IBM topped Wall Street's second-quarter targets with earnings of $2.02 billion, or $1.30 a share, but contract signings in its global services business lagged. Revenue for the quarter was $21.9 billion, with sales for IBM's Global Services unit falling 1 percent to $11.9 billion. According to analysts, IBM is facing a longer sales cycle as customers pare down outsourcing deals.

    "Bookings were lower than expected, and business deteriorated in June," said ThinkEquity Partners analyst Eric Ross in New York. "Management stated that customers increased their level of scrutiny, particularly in June."

    The play for customers interested in IBM's services: Play hardball, since IBM may be willing to cut a deal to land a signing in its pipeline.

  • SAP said its second-quarter software license revenue was up 8 percent. Nice results, unless observers were expecting growth of 17 percent. SAP, which said business in the Asia Pacific region slowed, maintained its outlook for 2006 and reported that profits in the quarter were up 43 percent, but the situation is worth monitoring.

    According to Thomas Weisel analyst Tom Roderick, SAP is banking on a budget flush by customers to save the second half.

    Read the full story on eWEEK.com: When Tech Spending Slows Down, Hug Your Vendor

    This article was originally published on 2006-07-21
    Business Editor
    Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.
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