Global 2009 IT Spending Will be Up, Down, Forrester Says

Published: January 19, 2009

by Alex Woodie

Global IT spending will decline by 3 percent to $1.66 trillion this year when measured in U.S. dollars, according to Forrester Research. That's the first time global IT spending has declined since 2002, the analyst group says. However, when Forrester prognosticators looked into the future using their special local-currency colored glasses, they found that IT spending will actually go up by just a hair, which is 2.5 percent.

Since the value of money from different countries is always going up or going down relative to other currencies, smart people around the world decided they needed a stable way to measure the value of transactions, one that doesn't succumb to the constant flux. Trying to come up with conversion factors that attempt to accurately measure spending is difficult--think about how you would determine sea level from a boat in the middle of a churning ocean, without assistance from GPS satellites, which aren't that good at measuring elevation anyway. The best you can hope for is a rough estimate. In lieu of a gold standard, the IT industry and others (such as the global oil market) picked the U.S. dollar to be measured in.

However, even the almighty dollar is not immune to occasional ups and downs. And when you throw in the tumultuous economic ride we've had over the last year--first the dollar lost a lot of value compared to other currencies during the first three quarters of 2008, then our recession went global and other currencies started to weaken as other countries experienced a much more severe slow-down than the United States--sometimes it's necessary to take a bit of a nuanced view to arrive at the truth.

Forrester's nuanced view on the situation produced a seemingly impossible result: global IT spending will both increase and decrease this year. Obviously, both outcomes cannot be true. People either will spend more on computers and software this year, or they will spend less. Maybe in quantum mechanics, you could say with a straight face that both results could occur simultaneously (along with 10 others, for each dimension). For the sake of sanity, let us consider both of Forrester's views separately, and then we'll try to merge the results into a cohesive view.

The U.S. Dollar Way

Forrester's forecast found global IT spending--purchases of computers, software, and services by companies and governments--will drop by 3 percent in 2009 to $1.66 trillion, as measured in U.S. dollars. That's about $5 billion less than was spent in 2008, which saw a healthy 8 percent increase from 2007, to $1.71 trillion.

When measured in U.S. dollars, 2009 will mark the first time in seven years that global IT spending has gone down. Not since the recession of 2001 and 2002, which both saw 6 percent decreases in technology spending, has the IT industry contracted. The good times are over, and there's no telling when they will return.

Forrester's forecast assumes the recession will start to end in the second half of the year, says Andrew Bartels, vice president and principal analyst at Forrester. "Unlike in past years, there are no significant growth markets to offset the weak ones," he says. The prospects for 2010 are a little bit better, but IT vendors should brace for the worst through the end of the year.

The Global Currency Way

When Forrester looked at predicted IT spending using a mix of local currencies, it found 2.5 percent growth across the board. The analyst group came to this conclusion by looking at several regions and determining how spending levels will change year-to-year.

IT spending in the U.S. will grow by 1.6 percent in 2009. In Western and Central Europe, IT spending will increase 1.3 percent. Spending in both Eastern Europe and the Middle East and Africa will grow 5 percent. The Asia/Pacific region, meanwhile, will grow 3 percent.

However, when all of the regional numbers are equated to U.S. dollars, there is a sharper slowdown in IT spending globally, Forrester notes. This is because the dollar today is stronger than it was at the beginning in 2009. A country whose currency has experienced inflation as a result of the worldwide economic slowdown will need to spend more money today to buy the equivalent IT product, which shows up as IT spending growth in Forrester's charts. However, when you equalize that against the U.S. dollar--sea level, as it were--then you see that those growth figures are somewhat skewed by currency fluctuations.

Current Currencies

Just as European vacationers flocked to U.S. stores last year to stock up on cheap goods and take advantage of the weak dollar, people in the U.S. would be looking for deals in Europe and beyond as a result of the renewal in the strength of the dollar. (Or at least they would, if it weren't for the recession.) Forrester notes the impact that the fluctuations in currency is having on IT spending, saying it will be a boon for non-U.S. IT vendors and will probably hurt those based in the States.

"The fact that 2009 IT purchases growth is so much weaker in U.S. dollars than in local currencies means U.S. vendors with significant overseas business will feel a double dose of pain, as both the economic environment and currency market will work against them for much of 2009," Bartel says.

Whether you look at IT spending through dollar lenses or consider IT purchases in local currencies, it all boils down to one simple fact: these are tough times in the IT industry.

RELATED STORIES

IT Jobs 2009: The Dot-Com Bubble Burst Was 'A Cake Walk'

IT Doing Better Than Other Careers in 2009

Forrester: Brace Yourself for Slow IT Growth

IT Staffing Will Be Stable for Q1, Projects Robert Half

IDC Projects IT Slowdown in Europe in 2009

ChangeWave Plots a 'Historic Collapse' in IT Spending

IDC Patches Punctured IT Spending Forecasts

Forrester CEO Weighs In on IT Spending for 2009

Gartner Outlines the Key IT for 2009

Gartner, Forrester Cut 2009 IT Spending Growth Estimates

Forrester Says IT Spending Is Choppy Across Industries and Geographies

CIOs in the States Say IT Hiring Still Happening in Q4

Gartner Is Projecting a Decline in IT Hiring This Year

IT Jobs Grow in the U.S. Despite Economic Woes

IDC Cautiously Reaffirms IT Spending Projections for 2008

IT Managers Are Under Pressure to Cut Costs, Says IDC

Most CIOs Say 2008 IT Budgets Are Stable, So Far

IDC Tweaks Global IT Spending Estimates Downward for 2008

Gartner Looks at the Big IT Issues for the Next Few Years

IDC 2008: It's Post Disruption, the Aftermath of Webification

                     Post this story to del.icio.us
               Post this story to Digg
    Post this story to Slashdot