Global Technology Spending: Declining This Year, Rising in 2010
Forrester Research released its 2009 Global IT Market Outlook earlier this year, reporting that global technology purchases will amount to $1.66 trillion in 2009, a 3 percent decline, after an 8 percent increase in 2008. While the decline may not be a surprise given today's economic conditions, it's worth noting that not only will there be fewer purchases in a recession, but American vendors will see their revenue earned from offshore sales is highly vulnerable to fluctuations in currency, putting them at a disadvantage given a strong dollar. On the bright side, growth is predicted to rise by 9 percent in 2010.
According to the report, technology investments include business and government purchases of:
- computer equipment;
- communications equipment;
- technology consulting and integration services; and
- technology outsourcing.
"2009 is going to be a tough year," says Andrew Bartels, vice president and principal analyst at Forrester Research and author of the report. Nevertheless, he says, "it does position [the industry] for a much stronger 2010." According to Forrester's outlook, the end of 2009 will make the early stages of a new technology cycle of growth, which will create more demand in the market. Simply put, it's just a matter of time. "We are now close to 2010 than we were three months ago. We're further into the downturn and close to the end [of it]." In fact, Bartels says, 2010 won't be a soft recovery, "it will be a much firmer, much more aggressive [one]."
Like any other purchase businesses make, technology is considered a cost. However, businesses understand that the efficiency enabled by technology and process automation is critical, especially in today's economy. "Don't be penny wise and pound foolish," Bartels says. "If a technology investment is going to save you $2, or $3, or $4, for every dollar [you spend], you'd be silly to be cutting your technology investment and causing other costs to be higher as a result."
Technology, he says, is by no means recession-proof, but its benefits certainly put it on the bottom of the list of areas to cut:
- Software will actually see no decline, and no growth, in 2009, with purchases amounting to $388 billion, it will have the strongest recovery in 2010 at 10 percent.
- Communications equipment (routers, switches, private branch exchanges, videoconferencing equipment, and unified communications equipment) investment will decline by 3 percent to US $353 billion, with growth in 2010 projected at 8 percent.
- Computer equipment (personal computers, servers, storage devices, peripherals) investment will decline by 4 percent to $434 billion, with growth in 2010 of 7 percent.
- Global IT services and outsourcing will decline by 3 percent, to $484 billion, with growth of 9 percent in 2010.
The cost savings make sense, Bartels says. Companies that, for instance, refreshed their equipment every two years are opting to hold out another year before embarking on an upgrade. CRM is probably more vulnerable to being cut than business analytics tools or ePurchasing applications. While CRM provides valuable information regarding consumer analytics and self-service capabilities, CRM is typically seen as a revenue generator rather than a cost saver, Bartels says, which puts it low on the list of priorities for companies losing revenue.
The forecast is based on the anticipation that the current recession in the U.S. and other major economies will begin to recover toward the end of 2009 and into 2010, the report says. If the global economy continues to worsen into 2010, technology growth will subsequently worsen. If the dollar weakens, however, the U.S. could actually see smaller declines or even positive growth.
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