Technology | Media | Telecommunications

Monday, November 24, 2008

IT Spending Decline in U.S. Hits Hardware

Worldwide spending on information technology (IT) products and services will slow significantly in 2009 as a direct result of the global financial crisis that began in September 2008.

According to a revised forecast from IDC, worldwide IT spending will grow 2.6 percent year over year in 2009 -- down from IDC's last forecast of 5.9 percent growth. In the United States, IT spending growth is expected to be 0.9 percent in 2009, much lower than the 4.2 percent growth forecast in August.

"Although all the economic forecasts went from up slightly to down drastically in a matter of days, the good news is that IT is in a better position than ever to resist the downward pull of a slowing economy," said John Gantz, chief research officer at IDC.

Technology is already deeply embedded in many mission-critical operations and remains critical to achieving further efficiency and productivity gains. As a result, IDC expects worldwide IT spending will continue to grow in 2009, albeit at a slower pace.

On a regional basis, spending growth in Japan, Western Europe, and the United States will hover around 1 percent in 2009. In contrast, the emerging economies of Central and Eastern Europe, the Middle East and Africa, and Latin America will continue to experience healthy growth, but at levels notably lower than the double-digit gains previously forecast.

On a sector basis, software and services will enjoy solid growth while hardware spending, with the exception of storage, is expected to decline in 2009.

Looking beyond 2009, IDC expects IT spending to make a full recovery by the end of the forecast period with growth rates approaching 6.0 percent in 2012. Despite these gains, IDC estimates that more than $300 billion in industry revenues will have been lost due to slower spending over the next four years.

In light of the uncertainties associated with the ongoing financial crisis, IDC also developed a downside scenario to help executives plan for a situation where the impact of the crisis is more pronounced.

In this scenario, IDC lowered the forecast for worldwide GDP growth in 2009 to 0.3 percent, which is 1.5 percent lower than the current forecast. This produced a forecast of 0.1 percent growth in worldwide IT spending in 2009 with negative growth in the United States, Western Europe, and Japan.

"Although the revised forecast and the downside scenario both reflect a grim outlook for global economic growth over the next several years, IT spending actually fares well when compared to the previous downturn after the events of September 11, 2001," said Stephen Minton, vice president, Worldwide IT Markets and Strategies at IDC.

Companies currently don't have the asset and spending overhang that enabled them to put off purchases after Y2K and the dot-com bubble. As a result, there will be greater pressure for them to continue making IT investments in order to stay competitive.