Global IT spending to fall more than 10 per cent

IT budgets cut this year, up next year

The global IT market will shrink by more than 10 per cent this year after IT buyers “overreacted” to the worldwide recession, according to Forrester Research.

But the analyst predicts a recovery starting by the end of this year, with overall market growth of four per cent next year.

Forrester revised down its forecast for 2009 after weaker than expected financial results in the IT sector during the first half of the year.

As a result, global IT spending for the year is expected to be $1,462bn (£880bn), down 10.6 per cent from 2008.

Hardware sales have seen the biggest decline, down approximately 13 per cent year on year, but all areas of the market have suffered, with software spending down 8.2 per cent and IT services and outsourcing falling 8.6 per cent.

Western Europe has been particularly hard hit when the market is measured in dollars, with Forrester’s figures predicting a 15.6 per cent drop in IT spending, compared with just a 5.1 per cent drop in the US.

But in local currencies, the decline is less marked – down eight per cent in Western Europe – although this is the largest fall of any region by this measure.

Yet despite the dramatic shrinkage in the market during 2009, Forrester analyst Andrew Bartels believes the worst is almost over, predicting a recovery to start by the end of this year.

“We think businesses and governments overreacted to the US 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,” he said.

“They will restore tech purchasing levels as they realise that the recession is not as deep or as long lasting as they feared.”

Forrester said the US will lead the upturn in the market in 2010, with IT spending growing as much as eight per cent next year. Western Europe is forecast to see 3.4 per cent growth, measured in dollars, and 6.8 per cent in local currencies.

“Looking ahead to the third quarter of 2009, while demand will still be soft, we think IT buyers will start to be more active as the worries about the financial crunch and a global depression recede,” said Bartels.

“By quarter four 2009, the signs that the US economy has hit bottom and started to recover will be clear, and CIOs will dust off their investment plans and start spending to take advantage of the recovery. By 2010, the tech recovery will spread to other markets, and gather strength.”