IT Spending Recovery One Year Out

By Judy Mottl (Send Email)
Posted Jan 6, 2009


IT managers, take heart. Recovering from the current recession won't be as bad as surviving the dot-com crash of 2001. For those who can remember further back, the economic rebound will be more like the recession that hit in 1990.

When it comes to IT, this recession won't be a repeat of the dot-com crash years, according to one industry watcher.

That's primarily because today's recession, which according to official estimates began in December 2007, should be over by year's end — and frugal spending strategies already in place will make it more bearable, according to a report released today by Computer Economics.

"IT managers have been somewhat conservative in spending 'compared to the dot-com bubble' and that has put them in a better position today," Frank Scavo, president of the Irvine, California-based research organization, told InternetNews.com.

Computer Economics' "IT Spending in Recessions: 2009-2010 Forecast" study surveyed 200 IT executives in companies with over $50 million in revenue. The firm has conducted surveys of IT spending and staffing trends since 1990.

The findings come as organizations continue cost-cutting measures and staff reductions begun in 2007 to cope with an increasingly challenging economic climate. A November ChangeWave research report noted IT spending projections for the last quarter of 2007 were the worst since 2001.

The goal, Scavo said, is to get through the next 12 months.

"If the pattern of recovery holds true today, we should see a modest increase in IT equipment and software investment in 2010," said Scavo, who noted that the current recession is tied to financial sector and credit lending issues, just like the 1990 economic event.

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What won't happen, however, is the tech boom that came after the 1990 recession, thanks to the Internet gold rush and Y2K concerns that pushed spending growth into double digits.

But the lack of another such boom may be a very good thing, given the fallout that later followed and actually played a part into making the 2001 "dot-com crash" so tough for the industry.

According to Scavo, the 2001 recession was tougher on IT vendors due to overspending on equipment and software in the latter part of 1990s. The collapse of the Internet bubble and dot-com crash then dumped a great deal of IT equipment, especially communications gear, into the secondary market.

Going forward, the 2010 forecast for the IT equipment and software segments shows between 5 percent and 10 percent growth.

Tech capital budgets will reflect a rebound of 4 percent to 5 percent — similar to rates in 2006 and 2007, Scavo said.

A higher rebound in capital spending could happen with continued low interest rates and stronger credit lines, according to the report.

In terms of operational budgets, the research firm expects that 60 percent to 65 percent of IT organizations will increase budgets in 2010, with an average growth of 2 percent to 3 percent in 2010.

This article was originally published on InternetNews.com.

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