capital expense

IBM expands cloud computing offerings

IBM is expanding its cloud computing offerings, responding in part to the realization that during tough economic times, many companies will trade service expense for capital expense, particularly when credit is difficult.

We believe that SaaS and cloud computing could be a big winner in the IT shift that is likely to occur in 2009, and IBM and others will surely be positioning to take advantage of the shift. For IBM, cloud computing is a critical hedge since it would likely suffer if buyers were to slow capital programs.

AT&T reorg favors market-target structure

AT&T is reorganizing to eliminate its original service-based management structure in favor of market-target structuring. The move will put the former wireless head, de la Vega, as head of consumer services, and could thus also be interpreted as a shift toward a wireless-centric policy.

We think that a market-based organization is smart given the fact that symbiosis among services seems key to leveraging opportunity and creating new applications and services using componentized service-layer infrastructure, all goals of operators worldwide. It also comes at a time when AT&T and other operators are puzzling out their capex plans for 2009, which will depend on some notion of how to monetize network investment.

CIMI Corp. to issue tech spending report

We are developing a report on technology spending in the service provider and enterprise space, based on the assessment of the current market crisis, our analysis and modeling of future trends, our past and present surveys of enterprises and operators, and the historical information available from government sources.

The report will cover the market for the period from the present through 2011 and will contain information on overall spending, key areas of spending focus, and how to maximize opportunities in the current market. This report will be available in November 2008, and clients will have an opportunity to have a presentation of the findings at in-person consulting sessions beginning about the second week of November. Purchase of the report will be required for the presentations.

Recession unavoidable; tech slump will increase

Against all odds and the advice of party leaders on both sides, the House has failed to pass the rescue bill. The problem came as Republicans deserted their leadership en masse and failed to support the bill. Democrats had previously indicated they would not accept responsibility for voting a measure that a Republican administration recommended unless it was supported by Republicans in the House, which failed to happen.

As we have indicated earlier, failure to pass this bill promptly would in our view put the U.S. into recession, and we believe that unless the current situation can somehow be recouped convincingly today, there is little or no chance that recession can now be avoided. We will publish an updated model result in our October Netwatcher newsletter issue, but it now appears to us that the odds of a recession worldwide and a tech spending slump have increased.

Regulators in Europe stepped in to rescue Dexia, a bank that has specialized in loans to state and local governments, offering the bank nearly $10 billion in loans. Dexia was among the EU banks considered to be in trouble, and the U.S. credit crisis is expected to continue to have broader impact in Europe unless a quick solution is found.

Our readers know that we have viewed the 2009 tech market health as depending on the timing of a U.S. recovery versus an EU turndown, and it now appears that the U.S. recovery is delayed and the EU turndown is accelerated. That makes it much more likely that tech spending will be curtailed worldwide in 2009, not only killing growth but actually creating a small decline in constant dollars.

Hope for a new plan that will pass is widely held, and stock futures this morning and the experience of foreign exchanges both suggest that the market is pricing in such a conclusion. The question will be one of timing.

2008 cable capital expense trends

Lower prices on cable modem termination system ports are likely in 2008, and this often means that the cable companies are putting pressure on the vendors with advance notice of procurements. The changes in pricing will come with some capability to re-architect the downstream bandwidth to the home, allowing either standard DOCSIS 2.0 rates up to about 15 Mbps or DOCSIS 3.0 rates as high as 100 Mbps. The former is more likely to deploy here in the US. A big push by cable players in 2008 would benefit Cisco significantly and would likely drive cable capex higher, to win the MSOs more Wall Street ire.