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IDC Revises IT Spending Projections

By Andy Patrizio (Send Email)
Posted Nov 14, 2008


More research is coming in saying that the growth in IT spending will shrink to the low single digits in 2009, with some areas being cut more than others. So far, however, it does not look like any drastic action is being taken.

Spending growth forecasts for 2009 slump further, but they aren't negative -- yet.

Then again, these estimates have been going down as fast as the stock market and about as routinely. Earlier this year, IDC estimated IT spending in 2009 would rise 5.9 percent. In August, it scaled that back to 4.2 percent growth. Now, it's down to 2.6 percent growth worldwide, and only 0.9 percent in the United States, based on an update released this week.

Any lower? Do we hear flatline? Yes, says Computer Economics, an IT research and advisory firm. In an October survey of 159 North American IT organizations, it found some respondents anticipate spending reductions, others expect increases, and the median of it all is IT spending growth in 2009 will be flat vs. 2008.

John Gantz, chief research officer for IDC, doesn't think this cutback will be as bad as it was in 2002, which came on the heels of the 9/11 attacks and the dot com implosion. "The IT market is in a difference space. There's no Y2K or dot com bubble overhang. Things are pretty lean," he told InternetNews.com.

John Longwell, director of research for Computer Economics, echoed this sentiment. "Companies have been fairly conservative on the upside in terms of adding personnel and growing IT budgets," he said. "Because they have been running lean and looking for ways to build up efficiencies, they are probably in a better position this time to make the case that they are already fairly efficient."

Much of this is in line with a similar report from Gartner. Both surveys had similar findings — new hardware deployments and new software projects were being put on hold, as were more discretionary items like training and travel. But security, maintenance and personnel were being maintained, as they are viewed as indispensable.

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Computer Economics found the most common steps to save money were cutting travel (55 percent of respondents said they were), delaying the start of major projects (44 percent said yes), and not filling open positions (40 percent replied affirmatively).

IDC said the areas most likely targeted for cutbacks were application development for new projects, PC hardware upgrades, server upgrades, some enterprise applications, Office upgrades and help desk.

Business analytics and business intelligence (BI) had a very wide range of response because their relative value is different from one industry to the next. Some companies are reliant on BI as a vital way of generating leads and cutting it would be suicide.

So is cutting security. "Cutting security is like cutting electricity," said Gantz. "You can't cut it. You have to let people go or sell a plant before you cut your IT security. If you cut back and have a security breach, any money you saved on the cutback is lost."

The IT department has, over time, become expected to deliver profits to a firm, and Longwell said any project that can make money will continue to see investment. "We're still seeing companies investing in data center automation, virtualization and other areas designed to improve the efficiency in their operations and I don't see those being curtailed because they promise a return on investment," he said.

The outlook beyond 2009 gets a little better. IDC expects IT spending to make a full recovery, with growth rates approaching 6.0 percent in 2012.

This article was originally published on InternetNews.com.

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