IDC Patches Punctured IT Spending Forecasts

Published: November 17, 2008

by Dan Burger

You can hear air leaking out of the tire, but it's not flat yet. That's how I view the most recent IT spending forecast by the analysts at IDC. We might be getting close to pulling over to the side of the road and putting on the spare, but, heck, we don't even know with any certainty whether the spare has any air in it. So let's keep driving on this one and see how far we get. We'll just drive a little slower.

Here in the IBM System i user community, there are tendencies to not spend as much when forecasts are rosy or cut back on spending when the forecast calls for rain . . . or sleet or snow, for that matter.

While the economic horror show caused all of us to lose some sleep in the past three months, the skillful economists and forecasters at IDC must have burned some midnight oil accumulating and tabulating IT shrinkage. Here's what they had to say. Earlier this year, they pegged worldwide IT spending growth in 2009 at 5.9 percent. That began to look a little optimistic by the time August arrived, took a few chips off the table and bet that 4.2 percent growth was a safe bet. What's happened since August has been nothing but ugly, so IDC's latest forecast is that 2.6 percent growth is possible. Again, that's worldwide growth for IT spending in 2009. Here in the United States, the increase will shrivel to 0.9 percent next year. Back in August, IDC was predicting 4.2 percent growth in the U.S. in 2009.

Spending projections in Japan and Western Europe will mirror the U.S. spending predictions next year. So they aren't out of the woods either, with maybe around 1 percent growth. The emerging economies of Central and Eastern Europe, the Middle East and Africa, and Latin America are expected to perform much better on their IT spending growth charts, but will come up short of the double-digit gains IDC previously forecast. Hardware (not including storage) is likely to take the biggest hit as spending slows in 2009. Upgrades to the PCs out in Cubicle City and the boxes down on the server farms are essentially frozen. Software and services, by comparison, will do relatively well.

It's pretty safe to say that IT projects with clear connections to profit centers will continue to see budget increases. Revenue enhancers will be a priority, as will projects that have demonstrated cost reductions and efficiency improvements. The "promise" of a return on IT investment will lose some of its luster. The deliverance of a return on investment, on the other hand, will continue to get food and water. Security? Can anyone afford to reduce the budget for security?

Because there is a certain "I don't have a clue what will happen next" factor to the economic turmoil that we are facing, IDC also released a "downside scenario" In this forecast, the idea of worldwide IT spending "growth" is kept alive, but just barely, at 0.1 percent, and spending reductions start to occur in the United States, Western Europe, and Japan.

Looking beyond the current economic uncertainties, IDC is willing to forecast a full recovery, with growth rates approaching 6 percent by 2012.

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