A Happier IT Forecast from Gartner for the New Year

January 10, 2011 Jenny Thomas

The analysts at Gartner are kicking off 2011 on a positive note: a predicted 5.1 percent increase in worldwide IT spending over 2010. This latest projection from Gartner is already an increase from its previous forecast of 3.5 percent growth for 2011 global IT spending. The current total spending forecast is $3.6 trillion in 2011.

The increase of 5.1 percent in 2011 comes on the heels of news that total IT spending in 2010 was better than Gartner’s predicted 3.2 percent growth. In 2010, worldwide IT spending totaled $3.4 trillion, up 5.4 percent from 2009 levels. Part of the upswing is due to currency exchange rate fluctuations that have continued to affect the U.S. dollar-denominated forecast. According to Gartner, of the 2.2 percentage point increase in IT spending growth in 2010, 1.6 percent is attributable to the recent devaluation of the U.S. dollar against other currencies.

These currency effects, combined with a slightly more optimistic outlook in some key segments have raised the outlook for 2011. The strongest growth is expected to come in telecom equipment, with the spending forecast to grow 9.1 percent in that segment. IT software and services are also predicted to increase by 7.5 percent and 4.6 percent, respectively. The hardware segment is forecast to grow 7.5 percent in 2011, but this is a reduction over 2010 totals. Gartner analysts said hardware vendors will face challenges, particularly in the area of PC growth, given likely weak economic growth through the first half of 2011.

You can see an overview of the Gartner’s numbers and predictions in the following table:

			Percent		Percent
	2009	2010	Change	2011	Change
Hardware	$334.3 M	$364.1 M	8.9%	$391.3 M	7.5%
Software	$222.3 M	$235.9 M	6.1%	$253.7 M	7.5%
Services	$762.9 M	$782.0 M	2.5%	$817.9 M	4.6%
Real IT	$1,319.6 M	$1,382.0 M	4.7%	$1,462.9 M	5.9%

Telco Hardware	$374.2 M	$426.6 M	14.0%	$465.4 M	9.1%
Telco Services	$1,533.2 M	$1,593.0 M	3.9%	$1,647.4 M	3.4%

Total IT	$3,227.0 M	$3,401.6 M	5.4%	$3,575.8 M	5.1%

The interesting thing about Gartner’s IDC spending numbers in this chart is that the “real IT” part of the market grew faster than the telecommunications pieces in 2010, and is expected to grow even faster in 2011 based on the projections. This is good news for IT shops and vendors alike.

Despite the rosier forecast for the coming year, Richard Gordon, research vice president at Gartner, said it isn’t exactly full speed ahead in the IT spending market.

“Aided by favorable U.S. dollar exchange rates, global IT spending growth is expected to exceed 5 percent in 2010, but a similar level of growth in 2011–while forecast–is far from certain, given continued macroeconomic uncertainty,” Gordon said in a press release. “While the global economic situation is improving, the recovery is slow and hampered by a sluggish growth outlook in the important mature economies of the U.S. and Western Europe. There are also growing concerns about the ability of key emerging economies to sustain relatively high growth rates.”

Gordon does concede that the IT economy is headed in the right direction. “Nevertheless, as well as a fundamental enabler of cost reduction and cost optimization, investment in IT is seen increasingly as an important element in business growth strategies. As the global economy repairs itself in coming years, we are optimistic about continued healthy spending on IT.”

Gartner analysts will discuss the latest outlook for the IT industry during a Webinar scheduled for tomorrow, January 11. The complimentary Webinar, entitled IT Spending Forecast, 4Q10 Update: 2010 Ends on the Upside, will begin at 11 a.m. Eastern time. You can register for this free Webinar here.

Additional detailed information on the outlook for the IT industry through 2014 is available in Gartner’s report Forecast Alert: IT Spending, Worldwide, 2008-2014, 4Q10 Update, which can be seen at this link.