IT Budget Forecast Lowered but…

Yesterday IDC lowered its forecast (IDC Forecasts Worldwide IT Spending Growth of 0.5% in 2009) for IT spending from its November estimates based on the “continued erosion of the global economy.” A downward revision is certainly called for and should…

Yesterday IDC lowered its forecast (IDC Forecasts Worldwide IT Spending Growth of 0.5% in 2009) for IT spending from its November estimates based on the "continued erosion of the global economy."

A downward revision is certainly called for and should not be a surprise to anyone. However, the forecasts are not nearly as dire as one would expect but will adversely impact some sectors.

The US forecast for overall IT spending is 0.1% or essentially flat. That may surprise many of us who read or listen to the media where they are proclaiming the second Great Depression. Actual spending may not meet this forecast but IDC, even with all the bleak economic news pounding us 24×7, is still not projecting Armageddon.

However, the forecast is mixed for IT vendors with US-based forecasts that "hardware will experience a sharp decline in spending with –16% growth while software and IT services spending will grow by 4% and 3% respectively." This confirms our breakdown of winners and losers in the future technology-based rebound.

Software vendors have been fairing better than the overall NASDAQ year-to-date on a relative basis and should continue to do so according to these estimates. Hardware vendors will be encountering harder times wth IT groups postponing purchases, consolidating servers and delaying upgrades.

Also, expect virtualization to expand to enable these hardware trends. Software and IT services, on the other hand, are needed to operate many businesses and, if targeted properly, help identify where to reduce costs, improve productivity, manage performance and look for revenue/earnings growth opportunities.

On a worldwide basis, "The IDC Black Book now forecasts worldwide IT spending will grow by just 0.5% year over year in 2009." with hardware down -3.6% and software and IT services growing 3.4%.  However the forecast is in constant currency, so "If recent exchange rate trends continue, this will translate into a significant decline in revenues for U.S.-based IT suppliers."

The bottom line for IT is that although budgets have been cut and some spending may be frozen this quarter, overall businesses see the value or necessity of IT.

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