Last November, Goldman Sachs published the 43rd edition of it’s annual report covering IT spending. Based on a survey of 100 decision makers from Global 1000 companies, it predicted a decrease of 4% in global IT spending and a 5% decrease overall in developed countries.This week, however, Goldman Sachs updated this study, taking into account the new global economy, the financial crisis, and the stock market. The already bleak forecast has become alarming — a 9% decline in global investments, and a 12% decrease in developed countries. According to the bank, this dramatic decline is confined to 2009 and Goldman Sachs is more optimistic for 2010, predicting -1% of total expenditures.

Obviously, this isn’t good news; it affects not only our business, but the entire world economy including employment and consumer spending. Yet it seems clear to me that some vendors — whether open source or proprietary — should take advantage of this decline in IT budgets. To Question 18 (Which software providers are gaining or losing share of your IT spending dollars?) respondents listed VMware, Red Hat, and Microsoft as the winners, and Novell, Informatica, and TIBCO as the losers. I’m not surprised to see the leaders of virtualization among the winners (VMware has led this category since 2005, and Citrix placed 4th in this latest ranking) since virtualization is the highest priority for enterprises these days, reducing both hardware costs and administrative overhead.

Over the past few years, open source vendors have significantly reduced project costs which is, of course, a good position to have in the coming months; reducing costs is considered a priority by almost 80% of the Goldman Sachs survey respondents. And, while we should be wary of shortcuts, we can ask ourselves to what extent IT departments have already decided to increase open source spending which would lower equipment costs for equivalent projects.

In terms of data integration, the Goldman Sachs survey places Informatica in the losers column. “This is likely a testament to a tougher IT spending environment, with customers preferring solutions offered by their current (mostly larger) vendors and/or simply ‘making do’ with solutions they have already and, in this case, primarily internally developed.” This proves that the proprietary model has much more to worry about than the open source model.

And yet, open source isn’t mentioned in the Goldman Sachs report. Can we conclude, as did Todd Ogasawara that “CIOs Surveyed by Goldman-Sachs Don’t Understand Open Source and Cloud Computing.” I think we still have some evangelism to do. Since this article was published in July 2008 a lot of water has run under the bridge, but I truly don’t believe that the CIOs of large companies are unaware of the benefits of open source. Let’s continue to prove it to them.

Bertrand

Every six months l’Indicateur Chausson Finance identifies the investments that French venture capital firms have made in new technologies in France and Europe. According to information collected from 52 venture capital firms in France, €556 million ($708 million) were invested in the last half of 2008. For the first time in eight years, investments capped €1 billion ($1.3 billion).

332 companies benefited from this capital, an increase of approximately 20 over the previous six months. The average investment per company is €1.7 million ($2.2 million), a growth of 12% in the same time frame.

Resurgence of the Internet

The report states that “the strongest growth of this period is in the Internet sector and e-commerce which reached €95.1 million ($120.8 million), up 92% over the previous six months. After two turbulent quarters, the Internet and e-commerce regained the ground lost since the 2nd half of 2007.” The health sector (and biotechnology) was, as always, the first to benefit, amassing €121.7 million ($155 million) or 22% of the total investment pool.

The software industry has received nearly €100 million - 18% ($127 million); the Internet and e-commerce nearly the same (17%). Cleantech stabilized at 12%. Note that the latter dominate the VC funding rounds and that the telecom sector represents only 8% of investment, as compared to 24% compared to the last 6 months.

Neither euphoria nor depression - pragmatism!

What do these figures tell us?
Even if they’re specific to the French market, they clearly reflect a dynamic to a market that professional investors (who bring a dose of optimism) often described as dull. At a time when governments are redoubling their investment efforts, it is interesting to note that the VC anticipated this trend in the last half of 2008, i.e., before any announcement of stimulus plans. I am both pleased and annoyed that investors show much more interest in new technologies than do institutions. We are still waiting for concrete commitment for the digital economy from various governments.

But how can we not welcome the renewed interest in Internet and e-commerce? Let’s not draw hasty conclusions, but the weakness of so-called traditional investments (”brick and mortar”) contrasts greatly with the dynamism of the Web. This sector has great potential which, if it materializes, should result long-term by hiring and growth and more. The question is no longer what should be done, but when.

We all remember when the ‘bubble’ burst in 2000 and we have learned to be careful. However, this indicator reinforces our belief that the technology sector as a whole has increasingly become a driving force of the global economy. The investors, who are always at the forefront of innovation, are not mistaken here.

Bertrand