IT spending will stagnate or slump in 2009, say analysts

IT budgets will be universally – and painfully – overhauled in 2009, with average growth running at a meagre 0.16%, according to a major survey of over 1,500 CIOs by Gartner.

And a smaller but similar survey by Forrester Research suggested that global spending on IT goods and services would actually drop this year – by 3% to $1.66 trillion – the first annual decline since the dot-com bubble burst seven years ago.
Gartner analyst Mark McDonald said 21% of CIOs interviewed for the study reported a cut in their IT budgets, while 46% reported only a slight increase.
"All CIOs will face the need to restructure their budgets, cutting in some areas and investing in others, including those reporting no change in their overall spending level," McDonald said.
Spending priorities centred around business optimisation technologies, particularly business process improvement and business intelligence. ‘Reducing enterprise costs’ was also a priority ranked ominously high.
"Some critics might say that CIO technology priorities could be more ambitious, but considering that CIOs have modest resources requiring close management, it’s clear why they are looking to derive more value from what they have before making significant purchases," McDonald added.

Meanwhile, Forrester’s report highlighted currency fluctuations as having a particularly negative effect on the US market, suggesting that at least some of the slowdown is attributable to economic factors rather than a reflection of the demand for IT goods and services.
"The fact that 2009 IT purchases growth is so much weaker in US dollars than in local currencies means US vendors with significant overseas business will feel a double dose of pain, as both the economic environment and currency market will work against them for much of 2009,” said Forrester analyst Andrew Bartels.
And while growth would be slightly better in Eastern Europe, the Middle East and Africa than in the US and Western Europe, “unlike in past years, there are no significant growth markets to offset the weak ones”.
Forrester suggests investment in communications capabilities will be particularly impacted in 2009, a somewhat prescient finding given Nortel Networks’ bankruptcy protection filing last week. The analyst firm predicts that the biggest slowdown however will be in computer equipment investment, where there will be a 4% slump.

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