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By | Timothy Prickett Morgan 8th July 2009 09:05

Gartner cuts 2009 IT spending forecasts

Stops just short of predicting a plague of locusts

The growing consensus among the IT market researchers is that 2009 is going to stink in terms of sales, and that whatever rebound happens in 2010 will not get us back to the revenue levels of 2008.

Now the prognosticators at Gartner have followed up Forrester Research and IDC, which put out revised forecasts on general IT and server spending in the coming years - and what Gartner predicts is equally depressing.

Specifically, Gartner now projects that for 2009, global IT spending will decline to $3.15 trillion, down 6 per cent from the $3.35tn in 2008.

By the way, even with all of the economic haemorrhaging going on in 2008, the global IT sector of the economy, when reckoned in U.S. dollars, was able to grow by 6.2 per cent last year. So the swing from what you might have expected even a year ago is quite large.

Unlike the wizards at Forrester Research and IDC, Gartner adds the phone bill into its reckoning of global IT expenditures, which also includes hardware, software, and services. This is one of many revisions that all of the market researchers have had to do - and will continue to do - as the economy fails to meet their expectations.

Forrester just did another revised forecast for 2009 spending, saying now that IT sales will fall by 10.6 per cent to $1.53tn after rising by 8 per cent to just over $1.7tn.

IDC revised its 2009 spending forecast back in February and is surely to take another stab at it any day now. Last month it put out revised (and even more depressing) forecasts for global and EMEA server spending between now and 2013.

IDC's economic models project that server spending for all of 2009 will drop by 22.1 per cent to $44.5bn. Looking ahead to 2010, sales globally will decline by four-tenths of a per cent to $44.3bn. There's a few points of growth per year out beyond that to 2013, but nothing like the server racket is used to - or engineered to support with its current profit margins.

In Gartner's latest forecast for global IT spending, the company said it expects sales of hardware to decline by 16.3 per cent to $317.8bn, and that the decline is being mitigated by sales of storage and other devices as the server business collapses - a collapse that is much worse than the dot-com bust.

Software sales, which have helped prop up IT vendors in bad times in the past decade, are also going to take a hit this year, falling 1.6 per cent to $218.3bn. The IT services business is going to have its own issues as well, with a 5.6 per cent decline to $761bn, and telecom expenditures are also projected by Gartner to come down by 4.6 per cent to $1.86tn.

"While the global economic downturn shows signs of easing, this year IT budgets are still being cut and consumers will need a lot more persuading before they can feel confident enough to loosen their purse strings," explained Richard Gordon, the head of global forecasting at Gartner who put out these numbers.

"The forecast decline in spending growth for the hardware and software segments in 2009 has almost stabilized," he continued, "and only minor downward revisions have been made to these forecasts this quarter. However, the full impact of the global recession on the IT services and telecommunications sectors is still emerging, and forecast growth in these areas has been further reduced significantly."

The rise of the US dollar against other currencies, as laughable as that idea may seem, is also contributing to some of the declining numbers. But even with that currency effect taken out, IT spending is down.

Looking forward to 2010 - well, looking ahead, anyway - Gartner is now projecting that global IT spending will rise by 2.3 per cent to $3.2tn. Of that, hardware spending will be flat at $317.7bn, but software revenues will eke out some growth, rising 3.2 per cent to $225.3bn. IT services in 2010 are also projected to grow by 3 per cent to $784bn, and telecom - the big daddy of the IT budget - will rise by 2.3 per cent to just under $1.9tn.

Averaged across the years running from 2008 through 2013, Gartner says IT spending will grow at an annual rate of a mere 1.9 per cent. I think it's safe to say that IT is part of the global economy and no longer so special that it can buck trends.

IT now suffers them, just like the rest of us. ®

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