IDC chops 2009 IT spending forecasts (again)
Hardware goes negative
The economic meltdown continues to slowly suck the growth out of the IT market, and the economists and market researchers at IDC have once again taken a sharp knife to their projections for IT spending in 2009.
IDC's Black Book report now says that global IT spending will only increase by 0.5 per cent, to $1.44 trillion. This echoes comments made earlier this week over at Gartner, which claims global IT spending will rise by the same 0.5 per cent in 2009, but to $2.68 trillion.</>
Back in August, as the U.S. economy was still on the verge of collapse, IDC was projecting a 5.6 per cent increase in IT spending on a global basis, and in mid-November, it trimmed that back to 2.6 per cent growth across all geographies and product types.
In the fall, IDC was saying that IT was better prepared to deal with a downturn in spending and that IT was more integral to companies than in the early 2000s, when the IT market went into a tailspin. The economic meltdown is throwing a bit of cold water on that theory, it would seem.
"Fourth quarter data from a number of key markets and geographies clearly shows that companies have been very quick to pull back their spending," admitted John Gantz, chief research officer at IDC in a statement accompanying the re-revised figures.
"The data also provides a clearer picture of how companies are curbing their expenditures. Investments in software and services are being maintained in pursuit of productivity and efficiency gains while hardware spending is being slashed in an attempt to stretch refresh cycles and squeeze more out of existing assets."
IT vendors based in the United States are going to take a double hit of pain, which only seems fair considering how the weak dollar made them all so cocky about sales and profits and bonuses over the past few years. With the dollar strengthening (hard to believe, isn't it?), sales made overseas for IBM, Hewlett-Packard, Dell, Microsoft, Intel, Sun Microsystems, and all the biggies located in the US of A are not going to amplify when they are translated into greenbacks.
More importantly, IT spending in the U.S. is going to contract harshly, if IDC is right. Specifically, IDC now says that IT spending in the States will grow by one-tenth of a per cent to $491bn. Back in November, IDC's best guess was nine-tenths of a per cent growth, which was no great shakes. But still, that is $4.5bn in revenue in the U.S. that is gone. Hardware spending - brace yourself - is now expected to decline by 16 per cent in the U.S., while software spending will eke out 4 per cent growth and services will extract 3 per cent growth.
On a global basis, IDC expects hardware sales to decline by 3.6 per cent, thanks mostly to steep declines in spending for servers, PCs, and printers. That hits Hewlett-Packard and Dell on three big fronts, and IBM is gloating like crazy because it has ditched its PC and printer businesses, but there is no guarantee that its server businesses, over the long haul of 2009, will be any better off than the PC or printer business.
IBM is undoubtedly hoping - as is HP and its new EDS unit - that services contracts as companies seek to cut capital expenses and move IT to the operational budget through outsourcing and other kinds of services deals, can fill in the hardware gaps. IDC is nonetheless trimming back its estimates for software and services sales growth in 2009. Back in November, the projection was for 4.6 per cent growth in software sales, but now it is at 3.4 per cent. Services spending growth was trimmed three-tenths of a per cent to 3.4 per cent.
IT spending in Western Europe is now projected to grow only by one-tenth of a per cent, down from the 1.2 per cent estimate in November. France and Italy are expected to see declines, and the United Kingdom and Germany are expected to flatten. The Asia/Pacific region is now anticipated to see IT spending growth of a meager 1.4 per cent, lower than the 4 per cent from the November Black Book report. Japan is going to contract IT budgets by 1.8 per cent (instead of growing 1 per cent), China's IT spending will be up 6.5 per cent (instead of 9.1 per cent), and India will cool off to 5.7 per cent (from 10 per cent).
Latin America will see 4 per cent IT spending growth, instead of 8 per cent, with Brazil leading with a 6 per cent increase (instead of 9 per cent). The Middle East and Africa will see increases of about 8 per cent, while Central and Eastern Europe will decline by 7.5 per cent in the latest IDC forecasts.
"The revised forecast is very close to the downside scenario we developed in November, which was based on the lowest worldwide GDP growth since World War II," explained Stephen Minton, vice president of worldwide markets and strategies at IDC. "While the outlook for 2009 is now worse than we thought just three months ago, we still expect IT spending to recover somewhat in 2010 and gain momentum through the rest of the forecast period."
Hope springs eternal, which is why we get out of bed some days rather than pull the covers tightly over our heads. ®