Forrester Research projects U.S. IT spending in 2006 to fall short of previous expectations and next year’s results to be even weaker.
Forrester, which bases its spending forecasts partly on data distributed by the U.S. Department of Commerce, reports that adjusted spending figures from the government for 2004 and 2005 investments have forced Forrester to lower its expectations for spending. For instance, the Commerce Department lowered its figures on investment in overall IT by $35 billion in 2005 and $15 billion in 2004. Plus, slowdowns in spending among leading global IT vendors through this year’s first two quarters — another measure Forrester uses to project overall spending — indicate a spending stall going forward.
According to the report, U.S. IT Spending Summary: Q2 2006, “U.S. revenues of 39 leading global IT vendors have shown investment growth slowed to 4% growth in Q2 2006 from growth of 7% to 9% in Q1 2006 and 2005.”
Forrester reports that IT spending in 2006 overall could increase by 6% over last year, based on figures released by the Commerce Department this past summer. The government data shows businesses invested about $482 billion in IT during Q1, then $480 billion in the second quarter. U.S. companies spent $88 billion on computers and peripheral equipment, more than $203 billion on software, about $108 billion on communications equipment and $190 billion on IT deemed as ‘other’ during the first quarter. In the second quarter, spending dropped for computers and peripheral equipment to $85 billion, $101 billion for communications equipment and $187 billion for other investment. Software spending rose to $207 billion in the second quarter.
Yet Forrester forecasts spending in the third quarter in these areas could increase to more than $496 billion, representing a 9% increase in investment over the same quarter last year. “Expect Q3 to be better than Q2 as buying decisions made in and right after the strong first quarter for the U.S. economy trickle down to Q3 revenues,” the report reads.
Andrew Bartels, a vice president at Forrester, explains in the report how the adjusted government figures affect Forrester’s projections. The research firm had predicted more of a boom in spending based on earlier figures, and now says the outlook looks less positive going forward.
“The Q2 2006 data indicates that even this recovery is slowing. There are still a couple of quarters in which U.S. tech purchases could bounce back up, but the prospects for a slowdown in 2007 are now looking very real,” the report reads.
