IT spending forecasts spiral further downward

Economic conditions have caught up with IT shops in a big way, and two financial analyst firms have new IT spending forecast data to prove it.

Goldman Sachs and IHS Global Insight separately released findings that point to a bigger decline in U.S. IT spending this year than previously expected. Goldman Sachs has revised its global 2009 spending forecast downward from -4% to -9%, citing declining revisions from key indicators such as capital spending, corporate profits and the firm's most recent IT Spending Survey results.

Listen to a recent podcast on the IT spending downturn. 

"Our total IT spending index (which includes salaries, services, depreciation, occupancy etc.) came in at 29.5, down from 31.0 in our prior survey in December, implying meaningful contraction," Goldman Sachs' "IT Spending Survey: Downturn takes its toll" report reads. "The index seems to be groping for a bottom, however, as the rate of decline came in at the slowest pace since last summer."

Goldman Sachs polls 100 managers quarterly with strategic decision-making authority at multinational Fortune 1000 companies to gauge their level of confidence in the IT market and high-tech vendors. Eighty percent of those surveyed indicated cost cutting as the highest priority for the coming year, compared with a bit over 40% indicating the same in mid-2008. The second highest ranking priority was disaster recovery and business continuity planning.

Other priorities include spending on technologies that could potentially deliver "a strong ROI," such as WAN optimization and application acceleration -- which landed at No.10 among the priorities. And desktop virtualization traveled closer to the top of the list, moving from the mid-20s just last year to the 12th priority on decision makers' agendas, reflecting positively on Citrix..

Hardware vendors, Cisco and HP specifically, are also seeing positive growth, despite the economic decline, according to the firm.

"Cisco, Juniper and Riverbed are gaining share of wallet, with Cisco in particular showing remarkable resilience in the face of continued network equipment spending," Goldman Sachs says. "In hardware, HP scores number one or two in all segments, solid evidence of our view of HP as a share-gainer in most categories."

Technologies that have lost ground among those surveyed include applications, such as ERP, and more surprisingly to Goldman Sachs, software-as-a-service.

"Software-as-a-service -- most often comprising application sales as opposed to infrastructure -- also slipped to No. 36 from a more middle-of-the-pack ranking in mid-2008," the report reads.

Goldman Sachs cautiously forecasts global IT spending in 2010 at -1%, or about flat.

"While our confidence level on this early estimate is low given a marked lack of visibility, we initiate an early top-down view for 2010 to begin guiding our company estimates we consider what lies beyond this year," the firm says.

Separately, IHS Global Insight this week released data that the forecasting company says indicates the U.S. economic crisis will cause a nationwide "IT recession" lasting until the third quarter of 2010, with hardware spending lagging behind perhaps until 2012. The firm reports that investment in IT services and software could recover by the first quarter of 2010, but it could be 2013 before hardware experiences a recovery.