The Hindu Business Line : Tech sector growth to drop sharply: Forrester

Bangalore, Oct. 17 Technology purchases in the US would see a sharper decline for the next several quarters with little or no growth in late 2008 and early 2009 due to the recent meltdown, said Forrester Research, but predicted there would be no downturn, helped by Government aid to stabilise financial markets.

“We expect Governments and central banks will take action to stabilise financial markets and prevent an economic disaster,” said Mr Andrew Bartels, an analyst with Forrester Research Inc, in a note, What the Financial Crisis Means to the Tech Market.

He said vendors of software and IT services, who have so far avoided much slowdown in 2008, would be hard hit in the next three quarters, with an average growth rate of 3 to 5 per cent instead of the 9 to 12 per earlier in 2008.

Brunt of Crisis

Computer and communications equipment vendors would bear the brunt of IT cost cutting as chief investment officers have been delaying and deferring buying PCs, servers and storage devices, said Mr Bartels. However, the computer equipment vendors may well turn up sooner than software and IT services because companies would begin to invest in equipment, he added.

Mr Bartels said US vendors can no longer look to overseas markets to offset a weak US economy. The European economies would go into a recession, pushing IT demand down in these markets as well. The US market is likely to recover sooner and stronger than other markets, though the demands may not be seen for a while, he added.

Emerging markets

He said the emerging economies, such as Brazil and China, would also see slower growth though they would escape the worst of global slowdown. Russia would slip into recession and India will barely avoid one, and the other emerging markets will be worse. Tech vendors must plan diversification in a geographic market as one market will not make up for the losses in other, he added.

The small and medium business would be a slow growth market, and the European and US multinationals are still the best market (with the exception of banks and auto companies), Mr Bartels said.

US small and medium-size businesses, including local and State Governments, are too weak to be counted as a growth engine for a while, he added.