When Tech Spending Slows Down, Hug Your Vendor

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

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