IT banks on Windows XP

IT industry leaders are starting to see the first signs of recovery that could spark a fresh round of IT spending early next year.

LONDON (ZDNet UK)-- IT industry leaders are starting to see the first signs of recovery that could spark a fresh round of IT spending early next year.

A combination of refresh cycles as IT buyers update their systems, and a Microsoft hard-sell may restore spending, though not everybody is convinced.

The chief executives of Dell and Oracle both recently predicted an upturn by the end of this year or early next year.

Dell believes the launch of Microsoft's Windows XP operating system will drive complementary sales of products, such as PCs based on Intel's Pentium 4 processor. In a recent interview with the Financial Times, Dell chief executive Michael Dell said companies will enter a period of investment three to four years after they changed systems in preparation for the year 2000. He commented that this will provide "the makings of a growth cycle".

Other observers agreed the release of XP will provide a spur to spending, and sources briefed by Microsoft said it is planning a mammoth marketing campaign. "Microsoft really believes that XP will be huge and is betting heavily on it," said one. Sources said Microsoft has earmarked £3m (US$4.2m) for the first fortnight of XP's release in the UK alone.

In a US press conference in June, Oracle chief executive Larry Ellison was upbeat. "Our current quarter looks a lot stronger than our previous quarter," he said. "We're seeing some of the big deals coming back.'' In its last quarter ended 31 May, Oracle saw sales slip three percent on the year-ago total. Both Dell and Oracle said that IT spending in Europe was stronger than in the U.S.

The IT director of a high-street pharmaceuticals firm said, "We're looking closely at whether we can spend again or put our savings to use elsewhere."

However, other news suggests that a number of IT firms believe that spending may continue to be reined in. For example, IT services giant Cap Gemini Ernst & Young recently laid off 2,700 staff, or four percent of its overall workforce.

Some industry figures said that even if there is a recovery they did not believe that IT would resume its previous levels of growth. "I'm sceptical," said Gary Evans, head of business development at Toshiba's Computer Systems Division. "We're seeing refresh cycles but we're more likely to see five, six and seven percent growth than what we had before."

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