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Analyst revises down its IT spending forecast

IDC has predicted IT spending will contract further due to the global economic turmoil and the IT industry will lose more than $300 billion in the next four years.

By Miya Knights, 14 Nov 2008 at 11:49

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In a worst case scenario outlined by analyst firm IDC, IT spending growth could slide into negative figures in the Western European region next year.

The analyst has revised its IT spending forecast down across the world as a result of the ongoing global financial crisis. But in its ‘downside’ scenario it lowered the forecast for worldwide gross domestic product (GDP) growth next year to 0.3 per cent - which is 1.5 per cent lower than the current forecast and worse than any year since World War II.

This produced a forecast of 0.1 per cent growth in worldwide IT spending in 2009 overall, with negative growth also being experienced in the United States, Western Europe, and Japan.

Even before this worst case could come into play, IDC’s newly revised forecast is predicting worldwide IT spending will grow 2.6 per cent year-on-year in 2009, down from its pre-crisis forecast of 5.9 per cent growth. And growth in Western European IT spending will hover around one per cent in 2009.

As a result, it also predicted that more than $300 billion (£202 billion) in industry revenues will have been lost due to slower spending over the next four years.

John Gantz, chief research officer at IDC, said: “Technology is already deeply embedded in many mission-critical operations and remains critical to achieving further efficiency and productivity gains,” he said.

Any growth will continue to be driven by the emerging economies of Central and Eastern Europe, the Middle East and Africa and Latin America, but at levels notably lower than the double-digit gains previously forecast.

On a sector basis, the analyst firm is expecting solid growth for software and services, while hardware spending - with the exception of storage - is expected to decline in 2009.

Looking beyond 2009, IDC expects IT spending to make a full recovery by the end of the forecast period, with growth rates approaching 6.0 per cent in 2012.

This was because companies don’t currently have the assets or spending capability to put off purchases like after Y2K and the dot-com bubble, said Stephen Minton, vice president of Worldwide IT Markets and Strategies at IDC.

“As a result, there will be greater pressure for them to continue making IT investments in order to stay competitive,” Minton added.