Yes. Austria-Hungary was a "Great Power" in Europe on the eve of the First World War. However, of the "Great Powers," - GB, France, Russia, Germany, Austria-Hungary - she was decidedly the weakest. She had suffered major blows to her international prestige in 1859 and 1866, losing her possessions in Italy as well as her influence on German politics. The oldest Habsburg possessions, Austria and Bohemia (Czech Republic) were as modern and developed as Western Europe. Bohemia itself was a major industrial center and boasted some excellent armaments factories. The rest of Austria-Hungary, however, was rather lagging in terms of modernization, rail accessibility, etc. Austria-Hungary still had the second largest population in all of Europe, behind only Russia, and in 1908, won a diplomatic victory over Russia when she annexed Bosnia-Herzegovina. I hate the term "sick-man of Europe," but for all intents and purposes, Austria-Hungary was the sick man of Europe, behind the Ottoman Empire, which had all but lost its foothold in Europe.

The Habsburg Army was also woefully unprepared for the First World War. As far as how the Habsburg Army was perceived in 1914, I can't exactly speak to that, though I can tell you the reality of its preparedness. Austria-Hungary was arming less of its population than any other European Great Power, less even than Italy! In terms of technology, the Austro-Hungarian Army was also lacking. The three most important technological innovations of the First World War - aircraft, rapid-firing steel-barrelled artillery and machine guns - were all insufficiently prepared for by the Army of Austria-Hungary. Most of Austria-Hungary's field artillery brigades were armed with copper-barreled guns, which were cheaper but metallurgically inferior to those of Germany, France and Russia. Its shell reserves were low (though nearly every country during the First World War experienced shell shortages) and many of its guns didn't have armored crew shields which had become almost standard by the beginning of the War. The Austro-Hungarian machine gun, produced by Mannlicher, was a perfectly adequate weapon except that there just weren't enough to go around. Finally, in terms of aircraft, the Austrians beat only the Russians in numbers of aircraft procured. In my own research into the field reports of the Imperial-Royal 13th Landwehr Division of Austria-Hungary, I've come across two separate reports begging Austrian soldiers not to fire at airplanes, whether friendly or foe. Apparently, Austrian troops were so unaccustomed to aircraft that they shot down two friendly planes within a month or two of each other.

Austria-Hungary had also not adjusted to the tactical improvements made since the turn of the century. The Balkan Wars of 1912 and 1913 - fought in Austria-Hungary's backyard - should have taught her generals something about the importance of close infantry-support artillery fire or the defensive power of machine gun fire. Instead, Austria-Hungary's commanders, who had not fought a real war since 1866, were still incredibly offensively-minded, commanding their troops to advance forward under withering machine gun and small arms fire in tightly packed skirmish lines, with bayonets fixed. Their main tactical assumption was that a well-trained, highly-motivated body of men could overcome the defensive power of modern weaponry. This assumption, which persisted even into the latter months of 1914, cost thousands of Austrian lives.

I will point out the two bright spots in Austro-Hungarian military preparedness. Their alpine mountain divisions were the best in Europe and had been for quite some time. In my opinion, the Austrian mountain brigades performed the best of any Austro-Hungarian troops in the First World War. The Austrians also had an awesome shallow-water fleet of river gun boats which saw action on the Danube performing offensive actions against the Serbs in 1914.

References: A Hopeless Struggle: The Austro-Hungarian Army and Total War, 1914-1918 by John Schindler

Speaking in purely military terms, Austria-Hungary's weakness in military and armament spending was compounded by an antiquated military organization. Instead of a unified national army, the Austro-Hungarian army was an amalgamation of three somewhat independent organizations. These were the Imperial Austrian Army (Kaiserlich Landwehr), the Royal Hungarian Army (Magyar Honvéd), and the Common K.U.K Army (Kaiserlich und Königlich Heer). The Austrian and Hungarian halves of the empire generally concentrated the majority of training, funding and new equipment on their own respective regiments. This generally left the Common Army units as ones of poor quality, short on training and equipment. This difference in quality was recognized by the military chancellery and the general staff, and was compensated for by having each Common Army regiment consist of 4 battalions, whereas the regiments of the Austrian and Hungarian armies each numbered 3 battalions.

The Austro-Hungarian Empire had approx. 450,000 men under arms at the beginning of the Great War, with reserves of 1.4 million men. In comparison, the German Empire had 850,000 men in the standing army, with reserves of 3 million; the Russian Empire had 1.2 million men in the army, with over 5 million reserves; the French Republic had 825,000 men in the army, with 3 million reserves; the Kingdom of Italy had 290,000 in the regular army, with 1.2 million reservists; lastly, the British Empire had 250,00 men under arms, with 400,000 reservists. As you can see in raw numbers, the Austro-Hungarian army was approx. half the size of that of Germany or France, and only a quarter of the Russian Army; it was however 50% more than the army of Italy.

The Austro-Hungarian army was organized into approx. 900 infantry battalions, and 60 Cavalry regiments. These were broken down as follows:

*113 Austrian Battalions in 37 first line regiments

*97 Hungarian Battalions in 32 first line regiments

*136 Austrian Battalions in 40 second line regiments

*97 Hungarian Battalions in 32 second line regiments

*408 Common Army Battalions in 102 line regiments

*45 Battalions of Bosnians, Tyroleans, and Poles organized into a 12 regiments

*15 Dragoon common regiments

*16 Hussar common regiments

*11 Lancer common regiments

*6 Austrian lancer regiments

*10 Hungarian hussar regiments

*10 Hungarian second-line hussar regiments

As you can see, only approx. 25% of these units were first line Austrian and Hungarian Infantry regiments, the majority of the army was composed of poorer quality Common Army and second-line units. The empire's cavalry units were generally of high quality, but would become largely useless in battles dominated by heavy artillery and machine guns.