US tech spend to fall 3.1% this year

New Delhi, April 1 Forrester Research on Wednesday lowered its outlook
on US tech purchases for 2009. It said that the purchase of IT goods
and services by American businesses and Government is expected to drop
3.1 per cent in 2009.

But there is some cheer for IT outsourcing vendors. The report
predicts that while consulting and systems integration services will
slip, IT outsourcing growth will be small, but positive at 2.1 per
cent. It could improve to 6.8 per cent in 2010.

"With the US economy dropping at an annual rate of 6.3 per cent in Q4
2008 and most professional economic forecasters reducing their
predictions for 2009 US real GDP growth, Forrester has revised its
projection for technology spending in the US to reflect these changes.
Forrester expects growth in IT investment will resume in Q4 2009 and
gather strength in 2010," the report said.

Accordingly, it has revised its initial projection of 1.6 per cent
annual rise in US business and government IT purchases, and instead
stated that the same will drop 3.1 per cent in 2009.

"In many ways, the biggest factor affecting the tech market is not the
recession but the breakdown of the financial system. The credit crunch
is still causing companies to dramatically cut back on all forms of
capital investment, including many IT goods and services, and this
will affect 2009 revenues for most IT vendors," said Mr Andrew
Bartels, Forrester Research Vice-President and principal analyst.

The data in the report focuses on IT purchasing across various
segments — computer and communications equipment, software, IT
consulting - integration services, and IT outsourcing.

Forecast by sectors
Forrester expects that US' purchases of computer equipment will drop
6.8 per cent in 2009, on top of a 4 per cent decline in 2008. However,
growth is expected to bounce back in 2010 to 7 per cent, it said.

Communications equipment demand will shift from 2008 growth, to a big
cut in 2009. "A mixture of enterprise demand for video conferencing
and mobile technologies and telecom companies demand for 3G wireless
and broadband equipment kept purchases growing 3.7 per cent in 2008.
Both factors will erode in 2009, leading to a 7.8 per cent decline,
but growth will revive modestly in 2010 to 4.8 per cent," it said.

Software purchases will decline slightly in 2009, with licence
revenues falling. The picture will improve in 2010, with growth of 6.3
per cent, it projected.

IT consulting and systems integration services too will slip in 2009.
Cutbacks in the project portfolio of most companies will lead to a
decline of 2 per cent in 2009 for such services. According to the
Forrester report, the outlook for 2010 remains positive for this
space, with 7.4 per cent growth expected next year.

IT outsourcing
However, IT outsourcing could well buck this overall gloom, clocking a
moderate growth in 2009 and 2010. "IT outsourcing turned out to be
weak in 2008, with 2.8 per cent growth as the economic uncertainty
froze potential clients, increased competition and smaller-scale
projects cut prices, and the recession caused prospects to wait to see
if prices would get even lower. These same forces will continue
through the first half of 2009, with revenues starting to improve in
the second half of 2009 and in 2010. Growth in 2009 will be small but
positive at 2.1 per cent, improving to 6.8 per cent in 2010,"
Forrester said.

http://www.thehindubusinessline.com/2009/04/02/stories/2009040251640300.htm