Gartner: IT Spending Up, But Overall Budgets Flat, in 2010
January 25, 2010 Timothy Prickett Morgan
Everything may not yet be coming up roses with the economy, but at least it doesn’t smell like the stuff you spread around the plants in the spring. The analysts who monitor the global economy and try to chart IT spending say that they anticipate that IT spending on hardware, software, services, and telecom will be up this year. However, based on surveys with chief information officers, it looks like IT budgets–including internal people costs as well as spending on IT wares–will be flat.
So I guess we all know what that means. Some or perhaps all of that growth in IT spending is due to translating global sales into U.S. dollars, and in local currencies, maybe there is no growth expected at all.
According to Gartner’s prognostications, global IT spending will rise by 4.6 percent to $3.36 trillion dollars, and amazingly, telecommunications and related services will account for an amazing $1.98 trillion of that spending, up 4.7 percent. After collapsing 13.9 percent in 2009 to $326.4 billion, spending on computer hardware (PCs, servers, storage, printers, etc.) will rise by a tiny 1.6 percent, hitting $331.7 billion in 2010. The market researcher expects that software spending will swing up by 4.9 percent $231.5 this year (after a 2.1 percent decline in 2009). IT services spending globally will rise by 5.6 percent, to $824.2 billion in 2010 (following a 3.5 percent decline last year).
“Last quarter, we did not expect to see IT spending levels recover to 2008 levels until 2011,” explained Richard Gordon, research vice president at Gartner, in going over the numbers. “However, now, with the upward revision to the current dollar forecast, we are projecting that global IT spending this year will approach the level seen in 2008. Our updated forecast for IT spending to reach $3.4 trillion in 2010 is actually a year earlier than we expected leveling our previous forecast update, and reflecting a bounce back in underlying IT spending from the sharp drop in 2009.”
It would be interesting to see how much of the growth in these sectors is due to translating sales into U.S. dollars, but Gartner did not provide this figure. My guess is somewhere around 4 to 5 percent, and if that is the case, then this means hardware sales will be down and software spending flat. Not exactly a blazing recovery. But a whole lot better than 2009, to be sure.
Gartner expects that the United States will only see a 2.5 percent increase in spending on IT products and services this year, and Japan will only see a 1.8 percent rise when reckoned in dollars. Western Europe will see a 5.2 percent bump, the Asia/Pacific region (absent Japan and including China) will see a 7 percent improvement, the Middle East will see a 7.7 percent increase (thanks to India), and Latin America will roar ahead by 9.3 percent.
The projections that Gartner put out for global IT product and services spending do not exactly mesh with the stats the company put together after surveying 1,586 CIOs who represent some $126 billion in corporate and public sector IT spending in 41 countries and 27 industries. Those CIOs indicate that their IT budgets (including people costs as well as IT product costs) will rise by only 1.3 percent (averaged across all of the CIOs, of course). This is presumably in constant currency, Gartner did not say, but did add that in 2009, these same CIOs had an average of 8.1 percent decline in their IT budgets. This was, Gartner said, the most challenging year for IT spending since the Gartner Executive Program (EXP) surveys began in 1999 as a kind of litmus test for other predictions and projections being made by the company.
“2009 was the most challenging year for CIOs in the corporate and public sectors as they faced multiple budget cuts, delayed spending and increased demand for services with reduced resources,” said Mark McDonald, group vice president and head of research for EXP at Gartner. “This is set to change in 2010, as the economy transitions from recession to recovery and enterprises transition their strategies from cost-cutting efficiency to value-creating productivity.”
The big change this year is that CIOs are looking at using more services and less internal IT while at the same time transitioning from managing IT resources to taking responsibility for business results enabled by IT systems. It is the difference between measuring uptime to measuring quality of service and silly things like revenues, profits, new and retained customers, and such.
“This transition gives the enterprise and IT the opportunity to reposition themselves and exploit the tough corrective actions taken during the recession,” McDonald added. “CIOs see 2010 as an opportunity to accelerate IT’s transition from a support function to strategic contributor focused on innovation and competitive advantage. They have aspired to this shift for years, but economic, strategic and technological changes have only recently made it feasible.”