IDC Predicts $300 Billion in Tech Spending to Evaporate

  • by Mel Duvall

As the economic clouds continue to darken, research firm IDC is now predicting that spending on information technology will be slashed significantly from earlier forecasts in 2009.
IDC is still predicting growth in IT spending, but in the United States it says that growth will be reduced to a trickle-0.9 percent compared to the 4.2 percent growth it had forecast back in August. Worldwide IDC is now forecasting spending will grow 2.6 percent in 2009, compared to the 5.9 percent growth it had predicted in August.

"Although all the economic forecasts went from up slightly to down drastically in a matter of days, the good news is that IT is in a better position than ever to resist the downward pull of a slowing economy," says John Gantz, chief research officer for the Framingham, Mass.-based research firm.
"Technology is already deeply embedded in many mission-critical operations and remains critical to achieving further efficiency and productivity gains. As a result, IDC expects worldwide IT spending will continue to grow in 2009, albeit at a slower pace."

On a regional basis, spending growth in Japan, Western Europe and the U.S. will hover around 1 percent in 2009. The strongest growth will take place in the emerging economies of Central and Eastern Europe, the Middle East, Africa and Latin America. On a sector basis, software and services will experience solid growth, while hardware spending is expected to decline in 2009. The one exception in hardware spending is storage, which should continue to see growth.

Looking beyond 2009, IDC expects IT spending to make a full recovery with growth rates approaching six percent by 2012. Despite that recovery, IDC estimates that more than $300 billion in industry revenues will be lost over the next four years due to the downturn.
But there is a bright side.

"Although the revised forecast and the downside scenario both reflect a grim outlook for global economic growth over the next several years, IT spending actually fares well when compared to the previous downturn after the events of September 11, 2001," says Stephen Minton, vice president of worldwide IT markets and strategies for IDC.

"Companies currently don't have the asset and spending overhang that enabled them to put off purchases after Y2K and the dot-com bubble. As a result, there will be greater pressure for them to continue making IT investments in order to stay competitive."