News

Forrester: Worst May Be Over for IT Market

Predicts across-the-board purchases of IT goods and services will improve late this year.

• By Herb Torrens
• 07/06/2009

IT purchasing has been so bad recently that things must be looking up.

That's the optimistic part of a Forrester Research report published this week that chronicles new lows in global and U.S. IT spending patterns. The upshot of the report, US and Global IT Market Outlook: Q2 2009, is that across-the-board purchasing of IT goods and services will improve late this year.

"The dramatic decline in tech purchases during the past three quarters has really set the stage for an upturn, and in fact it has been so bad, that it is good," said the report's author Andrew Bartels, in a telephone interview. "The fourth quarter of 2008, and the first two quarters this year, have created a very low base from which the market can make a significant rebound."

Businesses have been stretching the life of PCs for various reasons, including dissatisfaction with Microsoft's Vista operating system, said Bartels, who is vice president and principal analyst at Forrester. However, time changes everything. Now, with economic conditions improving, an aging PC inventory and a new operating system called Windows 7 in the wings, companies are going to rev up their PC capital expenditures, he explained.

The lack of access to capital has shut out spending plans at many companies and currency fluctuations have added to the general uncertainty, according to the report. Overall purchases of IT goods and services will decline by nearly 11 percent in 2009. The spending outlook for the U.S. IT market will decline by 5.1 percent, year over year.

Forrester's previous forecast had underestimated the spending decline in 2009, projecting just a three percent decrease globally and a 3.1 percent drop in the U.S. IT market.

The report expects declines in all sectors of the tech market, except for outsourcing. In 2009, outsourcing will rise by two percent.

Forrester predicts an 11 percent decrease in communications spending, a 10 percent drop in computer equipment purchases, a modest three percent decline in software purchases and a two percent decline in IT consulting services.

Bartels expects moderate spending declines in the third quarter compared with last year's third quarter. However, he predicts that spending will pick up in the fourth quarter.

"We believe that many companies over-reacted to what they thought was the coming of the next Great Depression," Bartels said. "Now, it's the middle of the year and things are not great, but certainly not as bad as some expected."

A recovery in IT spending will happen in 2010, the report predicts. It will be broadly based across all sectors of the IT market. The second-quarter IT market report can be accessed here.