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Volume 17, Number 40 -- October 20, 2008

Gartner, Forrester Cut 2009 IT Spending Growth Estimates

Published: October 20, 2008

by Timothy Prickett Morgan

If you are sitting in the data center and listening carefully to the board room upstairs, you probably just heard the other shoe drop. The first one is that the economy is slowing because of the mess in the mortgage and credit markets across most of the modern economies. And the second shoe is that IT budgets are now going to start being trimmed, cut, or slashed, depending on the industry and the severity of the economic slowdown.

Last week, as IT analyst firm Gartner was hosting its Symposium/ITxpo 2008 event in Orlando, Florida, the company's economists and model makers had been cooking up new prognostications for IT spending, and the news wasn't good. But it wasn't all bad, either. Gartner said that the situation was not as bad as during the dot-com bust, which you will recall was after an ERP spending binge and a Y2K remediation boom that was concurrent with the dot-com boom--facts that Gartner forgot to mention and that forced IT spending growth at the turn of the millennium in the middle double digits to be slashed to the low single digits.

"In a worst case scenario, our research indicates an IT spending increase of 2.3 percent in 2009, down from our earlier projection of 5.8 percent," explained Peter Sondergaard, senior vice president and head of research at Gartner. "Developed economies, especially the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009, the United States and Japan will be flat."

While the tumult in the financial markets in the past few weeks has been unnerving, and will have an impact on IT spending in the fourth quarter, according to Gartner, the budgets for 2008 are not expected to change substantially. And, the good news for IT personnel (or at least key people on staff) is that IT is embedded more deeply into the daily operations of businesses than ever before. Gartner also said that multi-year IT projects, which is a shift it has seen in recent years, can't be cut immediately; in fact, no matter the pressure to cut costs, it often takes at least two quarters to make cuts.

"We learned that in tumultuous times, CEOs want their executives and managers to be advisors and counselors, not just great implementers of directions given to them," Sondergaard said. "What they want now most of all is agile leadership. Leadership that can guide us through simultaneous cost control and expansion at the same time."

Whit Andrews, an analyst at the firm, put it a little plainer. "A financial era is ending. This age of conspicuous consumption is over, and the age of conspicuous frugality starts now. The world has changed, and your role, as an IT leader must change as well."

Andrews' advice? Look at each IT project as if you have never seen it before, and as if it has not been created yet. Then ask what it does, why it is needed, and how many people will be needed to deploy and use the resulting application and support its systems. Conserve cash in the IT budget. Make a list of the IT projects that will matter, and realize that some things on the list aren't going to make it through 2009's budget cycle. Reassure the best IT people you have. (And I would add, if you aren't getting reassurance, get training to make yourself more valuable because that is a pretty good indication that when the budget cuts into staff, you are on the wrong side of the knife.)

Over at Forrester, the wizards staring into their crystal balls predicted back in early September that IT spending in the United States would rise by 6.1 percent in 2009 and rise at between 7 percent and 8 percent globally. Scratch that after the past six weeks of crashing stock markets and freezing credit markets. Now, Forrester is projecting that IT spending might grow at only 2 percent to 3 percent in the United States, and only 3 percent to 4 percent worldwide. That's a pretty big swing, obviously. Many tens of billions of dollars in spending, in fact.


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