In its quarterly look at global IT spending, Forrester analysts say that new federal numbers indicate that before the economy collapsed in the fall of 2008, the tech industry was on the verge of seeing a spending boom. Now indications are that the IT industry hit bottom in the second quarter 2009, and Forrester is predicting business will grow again in 2010.
Recent upward revisions by the federal government in data surrounding IT
spending for 2007 and 2008 indicated that the industry last year was on the
verge of another boom until the economy collapsed in September, according to
analyst firm Forrester Research.
However, the flip side to the federal Department of Commerce raising the
amount that companies invested in IT during those two years means that the
declines projected for 2009 are even steeper than initially estimated,
Forrester analyst Andrew Bartels said in the quarterly global outlook report,
released Sept. 29.
Bartels in June had projected a 5.1 percent decline in global IT spending in
2009. Due to the revised numbers for 2008, he raised that decline to 9.3
"Those [federal] revisions confirmed our position that a tech boom was
starting to take shape in 2008, before being rudely interrupted by the
September financial crisis," Bartels wrote in the report. "The lingering
effects of that financial crisis continued to hurt IT capital investments in Q2
2009, especially in computer equipment, network equipment, and licensed
software, as companies stopped investing and hoarded cash."
The revised federal numbers were not the only contributor to Forrester's
higher projected rate of decline in IT spending this year. Another factor has
been the trend that the cutbacks in capital investment-which began last fall
with computer and communications equipment-spilled over to licensed software in
the first half of 2009.
However, nothing has made Forrester change from its previous prediction that
the IT industry will start recovering from the downturn in the fourth quarter,
and will see growth in 2010.
"The weak results in early 2009 also mean that the market will hit bottom
sooner, setting a low base for year-over-year growth starting in Q4 2009 and
into 2010," Bartels wrote in a blog
. "As vendors start to report their calendar Q3 2009 revenues in coming
weeks, revenue growth will still be negative in most cases. But the declines
will be smaller than in Q1 and Q2 2009. And calendar Q4 2009 revenues should be
close to even with year-earlier levels, and in many cases will be positive,
especially for U.S.
vendors reporting dollar revenues."
The sharpest declines in IT capital spending this year will be in the first
and second quarters. Business investments were down 13 percent in the first
quarter from the year before, and 15 percent in the second quarter, according
"We expect Q3 2009 will be another weak quarter, with a decline of 13
[percent] from a strong Q3 2008," Bartels wrote.
However, the decline won't be as sharp as in the second quarter, leading
Forrester to believe that Q2 was the bottom of the IT downturn. Bartels is
predicting that by the fourth quarter, spending will be almost back to Q4 2008
levels, down 1 percent.
Computer purchases in the United States
will continue to be low until Microsoft launches its Windows
7 operating system
in October. Bartels said the new OS will help revive PC
sales after two years of declines.
Communications equipment sales will hit bottom in the third quarter-or
possible Q4-thanks to both enterprises and telecommunications firms cutting
back on spending, while software sales also will continue to be under pressure.