IT Spending to Bounce Back Some in 2010, Says Gartner

Published: October 26, 2009

by Timothy Prickett Morgan

It's the fall, and that means that most of us are starting to look forward to the holiday season and better prospects for the next year. It would be hard to have a worse year than 2009 for a lot of companies and a lot more people, and everyone seems to be ready for some kind of rebound, a return to something called normal, in our work and financial lives. Last week, the analysts at Gartner offered some glimmer of hope that 2010 would be better, at least in terms of IT spending, than 2009.

By the way, Gartner is billing 2009 as the "worst year ever" for IT spending, and by that, Gartner is referring to the worst year in terms of revenue growth or decline, not the worst year for IT spending in dollar terms. (Although it would be interesting to show IT spending on an inflation-adjusted scale and then add in the aggregate computing power and network bandwidth we are getting for the 1982 dollar. I betcha Moore's Law is still beating inflation.) Gartner's wizards are prognosticating that IT spending worldwide will decline by 5.2 percent in 2009, to just under $3.2 trillion.

About $317 billion of that spending will be for hardware--servers, storage, PCs, networks, and such--and this area is expected to decline by 16.5 percent compared to 2008's spending levels. The server and storage market were already slowing before the economic meltdown hit, you will remember, so even this is not as tough of a compare as it could have been. Gartner says that spending worldwide on software will fall by a relatively tiny 2.1 percent, to $197 billion, and services spending will drag down spending some by falling 3.6 percent to $781 billion. Telecommunications and related services will account for $1.9 trillion in spending in 2009, according to Gartner's economic models, down 4 percent from the prior year.

In 2010, hardware spending is expected to be flat, so don't start throwing a party yet if you think the hardware budget is going to suddenly open back up and you are either going to get to spend more if you are a customer or earn more if you are a reseller of systems. The pressure is going to be there, and the triple-whammy of a poor economy, virtualization, and cloud/SaaS computing is going to put pressure on hardware spending. Software sales are expected to grow in 2010 to around $206 billion, up 4.8 percent, and IT services spending is expected to rise to $816 billion, up 4.5 percent. Telecom budgets are seen to be growing by 3.2 percent in 2010, to $1.96 trillion, and when you add it all up, the overall IT market will grow by 3.3 percent to $3.3 trillion.

"While the IT industry will return to growth in 2010, the market will not recover to 2008 revenue levels before 2012," said Peter Sondergaard, a senior vice president at Gartner and global head of research at the consultancy, who presented the company's latest projections for IT spending at the Gartner Symposium/ITxpo 2009 event in Orlando, Florida, last week. "2010 is about balancing the focus on cost, risk, and growth. For more than 50 percent of CIOs the IT budget will be 0 percent or less in growth terms. It will only slowly improve in 2011."

As I have been saying to my friends, family, and co-workers for some time now: Welcome to the new normal.

Interestingly, Sondergaard said that Gartner has calculated that upward of 1 million servers were kept in the field that would have otherwise been upgraded this year had it not been for the economic meltdown, representing about 3 percent of the worldwide server installed base. Gartner projects that 2 million servers will be operating past their normal dustbin point by the end of 2010 and that if current trends persist in the economy and in IT managers' behavior, 10 percent of the installed base of servers could be beyond its normal sell-by date by 2011. This is called making-do. People do it all the time, and IT shops are getting a taste, apparently, about how much fun it is to be part of the middle class. Cash for clunkers, indeed. I'll keep my clunker, thank you very much, and my cash while I am at it.

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