Global IT Purchases to Decline in 2009

By Greg McNevin

January 16, 2009: According to the analysts at Forrester Research, the fallout from the economic crisis will impact on IT spending in 2009, with global purchases of IT goods and services expected to decline by three percent.

According to Forrester’s "Global IT Market Outlook: 2009" report, businesses and governments will spend US$1.66 (AU$2.48) trillion on IT goods and services this year, a drop of three percent on 2008’s figure and a significant shift from the eight percent increase recorded in 2008 compared to 2007 figures.

The 2009 decline ends seven years of growth in global IT purchases, with the last fall in technology purchases being a six percent drop in both 2001 and 2002.

“Our forecast for 2009 rests on the assumptions that the economic recession in the US and other major economies will start to end in the second half of 2009,” says Andrew Bartels, Forrester Research vice president and principal analyst. “For IT vendor strategists, the global IT market will be a gloomy one in 2009, with prospects of improvement in 2010. Unlike in past years, there are no significant growth markets to offset the weak ones.”

When measured using a mix of local currencies, Forrester notes that the picture is a bit better, with global growth of 2.5 percent projected for 2009. Regionally in the relevant local currencies, US purchases of IT goods and services will grow by 1.6 percent in 2009; purchases in Western and Central Europe will be 1.3 percent higher than in 2008; Eastern Europe, the Middle East, and Africa will see 5 percent growth; and Asia Pacific purchases will rise by three percent. However, when all of the regional numbers are equated to US dollars, there is a sharper slowdown in IT spending globally.

This highlights another report finding that currency fluctuations are a key factor driving the global IT market and having a negative effect on US vendors in particular. Bartels notes that the fact that 2009 IT purchases growth is so much weaker in US dollars than in local currencies means that US vendors with significant overseas business will “feel a double dose of pain, as both the economic environment and currency market will work against them for much of 2009.”

By sector, Forrester found that:

• Software investment will do better than the average, with global purchases of software products projected to be US$388 (AU$580) billion in 2009, the same as in 2008.
• Communications equipment investment will shrink, with purchases of routers, switches, private branch exchanges (PBXs), videoconferencing equipment, and unified communications equipment falling to US$353 (AU$528) billion in 2009, a three percent decline.
• Computer equipment investment will see the biggest slowdown in growth. Purchases of personal computers, servers, storage devices, and peripherals will slip by four percent to US$434 (AU$649) billion in 2009.
• Global IT services and outsourcing will decline, with governments and businesses spending US$484 (AU$724) billion on IT consulting, systems integration, and outsourcing services in 2009 - 3 percent less than in 2008.

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