The Hindu Business Line : Forrester cuts outlook for US tech purchases

Scene across sectors
The financial services industry will cut spends by 3% in 2008 and 4% in 2009
The construction industry cut spends by 2% in 2008 and 2009
IT spends will have no growth in the retail sector

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Bangalore, Dec.11 Forrester Research cut its forecast for the US IT spend in 2008 and 2009, and said even though outsourcing growth would be moderate, demand for services such as consulting and systems integration will see a sharp decline.

In the report, US IT Market Outlook: Q4 2008, Forrester said it expects 2009 technology spending growth to drop to 1.6 per cent from the 6.1 per cent it had forecast in August. For 2008, the rate would be 4.1 per cent, compared with the earlier forecast of 5.4 per cent.

“We now expect four quarters of 2.5 per cent to 3 per cent quarterly declines in real GDP, triggered by the financial market crisis that hit in October and continues to reverberate through the global economy. As a result we have reduced our forecast for US tech purchases,” said Mr Andrew Bartels, Forrester Research.

The report said IT consulting and systems integration services, which saw growth of about 8 per cent in the first half of 2008, would fall to about 2.2 per cent in 2009. Demand for service-oriented architectures, squeezing value from past IT investments, mergers and acquisitions, and improving process efficiency will keep growth from slipping below 2 per cent in 2009, and lead to stronger growth of 7.9 per cent in 2010.

Area of growth

According to the report, IT outsourcing will get a small lift from an economic slowdown in 2008 as companies turn to vendors that can help cut IT costs. However, growth in IT outsourcing revenues will remain moderate due to low-cost offshoring, smaller deals, and the 9-15 month lag from the decision to outsource to it being actually done. One area of growth could be demand for managed network services offerings, which clients are increasingly adopting, the report stated.

Software purchases

Software purchases by US business and government would grow 5.8 per cent in 2008, and fall to 3.4 per cent in 2009 before bouncing back to 8.2 per cent in 2010, the report said.

Purchases of computer equipment would grow 3.1 per cent in 2009, and 0.4 per cent in 2008.

It would increase to 6.7 per cent growth in 2010. Communication equipment purchases growth would slow to 0.8 per cent in 2009, and increase to 8.1 per cent in 2010.

The report said the financial services industry will cut spends by 3 per cent in 2008 and by 4 per cent in 2009, and the construction industry cut by 2 per cent in 2008 and 2009.

IT spends will have no growth in the retail sector, and it will slow to 1 per cent in the industrial manufacturing sector. State and local government IT spending will also be weak.

The federal government, primary production, consumer products and pharmaceuticals, chemicals and oil and gas, public services such as healthcare and education, insurance, utilities, telecom, and most professional services, are unlikely to be impacted much by the recession.

As a result, their IT budgets are likely to grow by 4 per cent to 8 per cent in 2009.

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