Global IT spending to drop by nearly 11% in '09, Forrester says

The high-tech industry might finally be hitting rock bottom, according to Forrester Research, which Tuesday forecast global IT spending to decline by nearly 11% in 2009 before vendors and end-user organizations begin to see some signs of recovery later this year and early next.

Forrester Research adjusted its global outlook for IT purchasing in 2009 down again from the 3% decrease the firm previously predicted in March. Specifically in the U.S., the drop in tech purchases will be down 5.1%, a further decline from the 3.1% the research group forecast for the country earlier this year. The primary reason for the shrinking U.S. forecast is the “ghastly” first quarter and “likely similarly poor results in Q2”, according to Forrester.

“The biggest factor bringing the tech market down is the breakdown of the financial systems (which both caused the recession and is exacerbating it),” writes Andrew Bartels, Forrester Research vice president and principal analyst, in the report “ U.S. and Global IT Market Outlook: Q2 2009.” “U.S. businesses have been hoarding cash and cutting capital investment, with IT capital investment getting caught in the pullback.”

That pullback is reducing global spend across all categories of IT, Forrester predicts. For example, the research firm expects purchases of computer equipment to be down by 13.5% and a 12.4% decline in communications equipment buying. Software spending is anticipated to drop by 8.2%, and IT consulting and outsourcing services will be about 8.6% lower, Forrester says.

Yet the dismal outlook for 2009 is causing Forrester analysts to be cautiously optimistic for 2010.

“We think businesses and governments overreacted to the U.S. and global recessions – in part because of fears that a broken financial system meant normal lending was not available – by cutting back too much on capital investment in Q4 2008, Q1 2009 and Q2 2009; they will restore tech purchasing levels as they realize the recession is not as deep or as long lasting as they feared,” Bartels wrote. “However, the weak results in the first half of 2009 also mean that the market will hit bottom sooner, setting a low base from which positive year-over-year growth will start to occur in Q4 2009 and into 2010.”

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