Gartner and Forrester Now Forecast 2009 Decline in IT Spending

By Jessica Davis  |  Print this article Print

Market research firms Gartner and Forrester have both revised their IT spending forecasts for 2009 and now say IT spending will decline this year due to a deeper-than-expected recession. Gartner says the drop will be deeper than after the dot-com bust. Computer hardware sales -- PCs and servers -- will be hit the hardest, but nearly all technology categories will be hurt.

Market research firms Gartner and Forrester are now forecasting what channel resellers have known for a while – the economy amid the current recession is even gloomier than previously thought.

Gartner’s newly revised forecast for 2009 now says that global spending on information technology (IT) will decline by 3.8 percent. The change represents just the most recent downgrade in Gartner’s IT spending forecast which the company has been lowering for months now. In October 2008, Gartner had forecast that IT spending would rise by 2.3 percent in 2009, and in February 2009, Gartner said it expected IT spending to increase by 0.5 percent in 2009.

Forrester also revised its forecast for U.S. business and government purchases of IT goods and services in 2009, now saying they will decrease by 3.1 percent this year. Previously, Forrester had projected a 1.6 percent annual increase for 2009.

Forrester says that it expects all sectors of the tech economy will decline, with the exception of outsourcing.

Both these forecasts indicate that IT spending will be even harder hit than it was following the dot-com bust when it fell by 2.1 percent worldwide.

Both Gartner and Forrester say the decline in the overall economy is causing the IT spending pull back.

"IT organizations worldwide are being asked to trim budgets, and consumers are cutting back on discretionary spending," says Richard Gordon, research vice president, and head of global forecasting at Gartner, in a prepared statement issued by Gartner. "The speed and severity of the response by businesses and consumers alike to these economic circumstances will result in an IT market slowdown in 2009 that will be worse than the 2.1 percent decline in IT spending in 2001 when the Internet investment bubble burst."

Gartner says that forecasts for all four of its key market sectors – hardware, software, IT services and telecommunications – have been revised downward, with only software spending growth holding onto a tiny increase of just 0.3 percent for the year.

Gartner now says that computing hardware sales will decline by 14.9 percent, IT services sales will fall by 1.7 percent and telecom sales will fall by 2.9 percent.

Forrester reports a similar gloomy picture.

Forrester’s forecast calls for computers and peripheral equipment sales to decline by 6.7 percent in 2009, communications equipment sales to fall by 7.7 percent, software sales to fall by 0.4 percent, IT consulting services sales to fall by 1.9 percent and IT outsourcing sales to grow by 2.1 percent in 2009

"The U.S. recession keeps getting worse than we and many economists had expected," writes Andrew H. Bartels in the Forrester forecast report. "Instead of the 2 percent to 3 percent drop in real GDP that the U.S. experienced in the 1990s and 2001 to 2002 recessions, U.S. real GDP fell by more than 6 percent in Q4 2008 and will fall by a similar amount in Q1 2009, with more (although lesser) declines until the end of 2009."

Forrester says that drop is reflected in tech purchases.

"Computer equipment purchases will continue to bear the brunt of cutbacks in tech investment, but purchases of network equipment, software licenses and IT consulting services will also drop," Bartels writes. But there’s good news, too. "As the U.S. economy starts to recover in late 2009, IT purchases will revive strongly with strong growth projected for 2010."

Forrester is calling for a recovery in 2010, with computer and peripheral sales to grow by 8.8 percent, communications equipment sales to grow by 4.8 percent, software sales to grow by 6.3 percent, IT consulting services sales to grow by 7.4 percent and IT outsourcing sales to grow by 6.5 percent.

The credit crunch has impacted IT capital purchases very hard, according to Forrester.

"In many ways, the biggest factor impacting the tech market is not the recession, it’s the breakdown of the financial system," Bartels writes. "Companies large and small have been shut out of credit markets, and even those that still have access to bank loans, markets for commercial paper or corporate bonds often have had to pay much higher interest rates.

"Businesses have responded by going into a cash-hoarding mode, with big and dramatic cutbacks in all forms of capital investment. Since many IT goods are in the capital budget, IT markets have taken a disproportionate share of the capital investment collapse."

Forrester also offered this caveat of an alternative scenario -- that the recession will last well into 2010.

"That scenario, which we put at a 25 percent probability, would arise if efforts to recapitalize the financial sector break down," Bartels writes. "Should this happen, U.S. tech purchases would decline by as much as 6 percent in 2009 and further by 3 percent to 4 percent in 2010."



Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com