IDC: Worldwide IT Spending To Increase 0.5 Percent, Down from Previous Estimates

• By Scott Bekker
• 02/26/09

Market researchers at IDC, who produce one of the most widely watched forecasts for IT spending, have revised the forecast for 2009--and it's "downward ho."

Framingham, MA-based IDC released the new projection Wednesday, revising a forecast first released in August that was later substantially downgraded in a revision released in November as global economic conditions deteriorated.

"Fourth quarter data from a number of key markets and geographies clearly shows that companies have been very quick to pull back their spending," said John Gantz, chief research officer at IDC, in a statement describing the new forecast.

"The data also provides a clearer picture of how companies are curbing their expenditures," Gantz said. "Investments in software and services are being maintained in pursuit of productivity and efficiency gains while hardware spending is being slashed in an attempt to stretch refresh cycles and squeeze more out of existing assets."

IDC now forecasts that worldwide IT spending will total $1.44 trillion in 2009, an increase of 0.5 percent over 2008. That's down from IDC's 2.6 percent growth forecast from November and way down from the 5.9 percent growth IDC had anticipated in its August report.

By far the biggest drag on the forecast is hardware. IDC now projects that global spending will contract in the hardware market by 3.6 percent. The hardest-hit subsectors in hardware include servers, PCs and printers/multi-function printers. In November, IDC was still projecting global hardware sales to grow, but by a tiny 0.5 percent.

The new projection calls for software sales growth of 3.4 percent, down from a 4.6 percent growth expectation in November. IT services are now also expected to grow by 3.4 percent, down from an earlier expectation of 3.7 percent growth.

The U.S. market is expected to lag global growth rates. IDC's new February forecast projects 0.1 percent growth in overall IT spending, down from a 0.9 percent growth forecast in November and a 4.2 percent growth forecast in August.

The U.S. hardware sector is in for a bruising 2009, if IDC's projections prove correct. The analysts now believe U.S. hardware sales will contract by 7.4 percent this year. Software sales in the United States are forecast to grow by 4 percent, while services revenues are expected to increase by 3 percent. Overall, U.S. IT spending is now forecast to hit $491 billion in 2009. In a news release about the new forecast, IDC also warned, "If recent exchange rate trends continue, this will translate into a significant decline in revenues for U.S.-based IT suppliers."

IDC expects growth in Western Europe to parallel the United States, with 0.1 percent IT spending growth in 2009. Spending in Germany and the United Kingdom is expected to be flat, while France and Italy are projected to experience contractions.

The Asia/Pacific region, excluding Japan, could do slightly better. IDC's new forecast pegs A/P growth at 1.4 percent, a decline from the 4 percent growth that IDC anticipated in November. IDC sees China and India still growing fast, but not at the double-digit or near-double-digit rates it had expected in November. The new forecasts are for 6.5 percent IT spending growth in China and 5.7 percent growth in India.

The brightest spots from a regional perspective are Latin America, where the projection is for 4 percent IT spending growth, and the Middle East and Africa, a region still anticipated to increase its IT spending by 8 percent.

Lowlights are Japan and Central and Eastern Europe. IDC's forecast for Japan now calls for a contraction in IT spending of 1.8 percent, a 2.8 percentage point downward swing from November. The Central and Eastern European region, meanwhile, is expected to have an IT spending growth rate of -7.5 percent.

Despite the steep drop in expectations for 2009, IDC Vice President Stephen Minton wrote that the firm sees some light at the end of the tunnel. "While the outlook for 2009 is now worse than we thought just three months ago, we still expect IT spending to recover somewhat in 2010 and gain momentum [in subsequent years]."