IT spend to fall for first time in eight years

 

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By Reuters

Posted on 13 Jan 2009 at 14:52

Weakening economies will push spending on IT products and services down 3% this year after seven years of growth, according to Forrester Research.

The technology research firm says that recessions in the US and other countries would be the main driver for slower spending and that currency fluctuations will be a secondary factor.

While the research indicated a 3% growth rate for 2009 based on a weighted average of local currencies, Forrester said that in US dollar terms the global market would fall 3% to $1.66 billion, after rising 8% in 2008.

In comparison, technology spending fell 6% in both 2001 and 2002, during the dotcom crash.

Forrester said that while the weaker US dollar boosted 2008 revenue, a stronger dollar will hurt the 2009 figures.

It expects a boost for some companies from the weaker euro in early 2009, including vendors such as Alcatel-Lucent, Ericsson, SAP and Nokia Siemens. But this "is likely to be short-lived once the dollar returns to a lower value against the euro" Forrester claims.

While the market will be challenging for all technology spending in 2009, Forrester sees some sectors holding up better than others.

"Software purchases will do a bit better than other categories, but all vendors will face a tough time until late 2009 or early 2010," according to the report by Forrester vice President Andrew Bartels.

He says 2009 software purchases will be unchanged from 2008 at $388 billion, while the computer market will fall 4% to $434 billion for products including PCs, servers, peripherals and storage gear.

The communications equipment market, including routers, switches and teleconferencing gear, will fall 3% to $353 billion in 2009, according to Forrester. It expects the IT services and outsourcing market to fall 3% to $484 billion.

Forrester believes IT spending may recover to grow 9% in 2010 in terms of US dollars and 6% in terms of local currencies.