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As information technology firms prepare to declare their fourth quarter and year-end results, there is more sombre news for the sector. Global IT spending is expected to decline over 3 per cent, say analyst firms.
Business and government purchases of IT goods and services in the US will decrease by 3.1 per cent in 2009, compared with the 1.6 per cent annual increase previously projected by Forrester Research. Gartner, too, predicts that the IT spending forecast will be $3.2 trillion (in revenue) in 2009 - a 3.8 per cent decline from the nearly $3.4 trillion of 2008.
"The credit crunch is still causing companies to dramatically cut back on all forms of capital investment, including many IT goods and services, and this will affect the 2009 revenues for most IT vendors," said Andrew Bartels, vice-president and principal analyst, Forrester Research.
"The speed and severity of the response by businesses and consumers alike to these economic circumstances will result in an IT market slowdown in 2009 that will be worse than the 2.1 per cent decline in IT spending in 2001, when the internet investment bubble burst," said Richard Gordon, research vice-president, and head of global forecasting at Gartner.
Gartner points out that while the growth projections of all four key market sectors - hardware, software, IT services and telecommunications - have been revised downward, software spending growth will remain positive.
As for IT outsourcing, the Forrester research says growth will remain moderate in 2009 and 2010. Economic uncertainty, increased competition, price cuts in smaller projects and recession would continue through the first half of 2009, with revenues starting to improve in the second half of 2009 and in 2010, it said. Growth in 2009 would be small but positive at 2.1 per cent, improving to 6.8 per cent in 2010, said Forrester.
But Forrester believes that IT consulting and systems integration services will slip in 2009. "Cutbacks in project portfolio of most companies will lead to a decline of 2 per cent in 2009 for IT consulting and systems integration services. The outlook for 2010 remains positive, with 7.4 per cent growth expected in 2010," said the report.
"There is light at the end of the tunnel - the demand has been delayed but not cancelled. Growth will come back strong once the recession and tight credit conditions start to ease. So, IT vendor strategy professionals should get prepared by investing in research and development and focusing on building proof points, case studies, and success stories about how their technology solutions have helped businesses," said Bartels.
