IDC Raises Global IT Spending Projections for 2010
September 7, 2010 Timothy Prickett Morgan
So here’s the three questions everyone in the IT sector wants to get an answer to: Is there going to be a double dip in the Great Recession, what is going to happen to IT spending in the second half of 2010, and how will this all affect my compensation? And if you are looking for answers, so are the economists and box counters over at IDC. But unlike you, they are paid to respond to questions like these instead of taking the bugs out of someone else’s code or going to meetings to defend the IBM i platform.
In recent weeks, both IDC and rival Gartner have cut back on their PC shipment and semiconductor revenue projections a little bit for 2010, mainly because the PC market has slowed down a little faster than expected as we get rolling here in the second half of 2010. But IDC still thinks overall IT spending is building momentum, mainly because many projects and upgrades have been put off for two years or more. And thus, somewhat paradoxically, IDC has just raised its overall IT spending projections a tad bit for 2010.
Those projections are made based on more than 40 years of data that correlates IT spending and economic conditions, and are contained in something IDC ominously calls the Worldwide Black Book. And these projections are updated regularly because economic conditions, and therefore IT spending plans, keep changing.
In the latest little black book prognostication from IDC, IT spending worldwide is projected to rise by 6 percent, to $1.51 trillion. Hardware spending is expected to rise by an impressive 11 percent, to $624 billion, while software spending will only increase by 4 percent and services spending will only go up by a measly 2 percent. Back in March, IDC was projecting that IT spending worldwide would rise by 3 percent, to $1.48 trillion. Yes, that is only $30 billion or so different. Pocket change in this racket, I suppose.
“The first half of 2010 was robust by any standards for the IT industry,” explained Stephen Minton, vice president of worldwide IT markets and strategies at IDC, in a statement accompanying the Worldwide Black Book. “PC shipments were strong, enterprise spending began to recover from the depths of the Great Recession, and consumers remained enthusiastic about new devices such as smartphones. While the high growth rates recorded by many vendors in the first two quarters of 2010 are partly a reflection of how bad things were in the same period of 2009, there’s also no doubt that it partly reflects a very real swelling of pent-up demand for hardware replacements and upgrades.”
As measured in local currencies instead of translating everything sold back into U.S. dollars, Western Europe is a bit of a laggard and is now anticipated to show only 3 percent IT spending growth. Japan is worse off, with a mere half-point of growth, and is far behind China (up 21 percent), Russia (up 17 percent), Brazil (up 14 percent), and India (up 13 percent). Let me put it to you this way: If Brazil suddenly announced that it had nuclear weapons, no one in the U.S. business community would make even a peeping sound. The other three fast-growing economies, of course, already have nukes. The United States, the other big nuclear power, is expected to see IT spending go up by 5 percent this year, which is a whole lot better than the 4 percent swoon it had in 2009. (It sure felt worse than that, didn’t it? And the swing by nine points to the positive does not feel much like a party, does it?)
Minton says that the next three months are key in determining how 2010 will finish and how 2011 might look. There’s pent-up demand for all kinds of goods and services, but there is uncertainty about local economies and the mesh of them that comprise the global economy. (There are not really separate economies any more, but rather separate artificial probe points that we wrap around economic activity where we can measure the flow of money coming and going.) IDC reckons that a double-dip scenario that begins in late 2010 will mean 1 percent IT spending growth next year, which is a lot worse than the baseline 6 percent growth for 2011 in current Worldwide Black Book model. Such a dip would mean woes would extend into 2012.
Here’s to hoping the economy actually does some growing, then, somewhere other than the BRIC countries that seem to be hogging a lot of the upside these days.