CIOs: Storage, virtualization, IT staffing in; PC upgrades, Vista, consultants out

CIOs expect their IT spending to be up 2.3 percent in 2008, but PC upgrades, outsourcing and consultants are viewed as the most discretionary items in budgets, according to a survey by Merrill Lynch. Virtualization, storage and labor are among the least likely items to be cut.

Merrill Lynch's second quarter survey of CIOs indicates that tech spending isn't falling off a cliff, but it's clear that not all projects are created equal. CIOs indicated that they were cutting costs by limiting traveling and training expenses, consolidating servers via virtualization and transitioning from desktop to centralized printers.

Here's a look at the cross currents and key items in Merrill Lynch's second quarter survey:

Dell remains the preferred enterprise PC vendor and is expected to gain 4 percent of share to get 48 percent of the corporate PC installed base in 2008, writes Merrill Lynch analyst Jeff Fidacaro in a research note.

More than 90 percent of CIOs are now using virtualization in their x86 server environments, up from 83 percent in the first quarter.  This move toward virtualization will spark server hardware upgrade cycle to blades. But in the long-run virtualization will ding server units--something I've argued for a long time only to have vendors repeatedly tell me that it won't happen. Survey says:

Storage is the top hardware priority with 2008 storage budgets expected to jump 10 percent in 2008. EMC is expected to benefit the most as 64 percent of CIOs were customers of the storage giant.

Forty percent of CIOs said they don't plan to upgrade to Windows Vista for at least three years or not at all.

Here's the breakdown of IT spending for 2008:

But there are a few moving parts. Here's a look at categories deemed discretionary. Only 7.6 percent of CIOs saw IT staff as a discretionary item, down from 9.9 percent in the first quarter.

And the priorities: