IT spending downturn is over - Forrester

Downturn of the last two years "unofficially over"

Businesses and the public sector will begin to spend more money on technology this year, according to analyst house Forrester.

The UK will see a nine percent growth in spending to $84 billion (£52 billion), making it the fourth largest market globally in dollar terms, Forrester said. But due to changes in the strength of the pound, it would grow only four percent in sterling terms.

The recovery will see global spending rise 8.1 percent to over $1.6 trillion (£998 billion), Forrester said. Last year, as the recession continued to hurt technology investment, spending fell 8.9 percent. Globally, the decline of the dollar against a number of currencies, and economic growth in Australia, China, India, and other Asia Pacific countries, aided the growth.

Andrew Bartels, Forrester analyst, said the technology downturn of the last two years was "unofficially over". He highlighted Europe as the region with the best prospects, in particular Western Europe, including the UK, and central Europe.

In these areas spending is predicted to rise 11.2 percent in dollar terms, but this is boosted by the decline of the dollar against the Euro. In local currency terms, however, the US had the best prospects.

US spending growth is predicted to be 6.6 percent this year, hitting $568 billion. IT purchases in Canada would grow by 9.9 percent in dollar terms, Asia Pacific by 7.8 percent, and Latin America by 7.7 percent, Forrester said.

Hardware and software are set benefit from the greatest increase in spending, the report stated. Globally, hardware spending will be up 8.2 percent, as businesses begin replacing old PCs, servers, and storage equipment after two years or more of cutbacks.

Software spending will rise 9.7 percent, mostly affected by operating system and applications expenditure, Forrester said. IT consulting and systems integration will rise 6.8 percent, outsourcing will see a 7.1 percent spending increase as more deals are signed off, and telecoms equipment spending will rise 7.6 percent.

Forrester noted that there was likely to be "a discrepancy between our forecasts of a good 2010 tech recovery and the 2010 budgets and spending plans that chief information officers have put together".

This is because CIOs would err on the side of caution following the difficult recent years. Suppliers would need to recognise this, understand cost concerns, and demonstrate success stories among customers, it said.

The analyst group also warned of the possibility of a "double dip" recession, where the problems return next year. It estimated a 15 percent probability of this happening, and said this would cause US technology purchasing to fall up to four percent.

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Leo King

IDG News Service
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