Gartner’s 2010 & Beyond IT Spend Forecast

Wednesday, April 14, 2010

Investments in computer hardware will bolster a tech recovery in 2010 as corporate IT buyers look to buy mobile PCs, desktops, servers, storage and network devices in the coming months, according to industry watchers.  Forrester Research and Gartner separately released IT spending forecasts for the coming year, and both research firms point to positive growth in hardware and software spending, developments that will contribute to a tech recovery in 2010…..According to Forrester’s research for Q1 2010, U.S. spending on information and communications technology products and services will reach $741 billion 2010.  Software and telecommunications services will represent the biggest part of the total, at $194 billion and $191 billion respectively, while computer equipment spending will represent about $83 billion.  Forrester points out that in the U.S. computer equipment spending is set to increase by more than 11%, mainly due to “replacement of old PCs, servers and storage equipment.”  The research firms says software spend will grow by 10.5% while communications equipment spending will increase 7.2% to $108 billion in IT spend for 2010, “based on better-than-expected results from network equipment vendors in Q4 2009,” the Forrester report reads.  “For software, growth will result from a mixture of the revival of deferred license software purchases following the 2009 capital freeze, ongoing growth in SaaS software and continued strong growth in Smart Computing platform technologies like service-oriented architecture (SOA) infrastructure, virtualization software and analytics,” Forrester states.  IT outsourcing, set to increase by 3.8% to $79 billion, will be the “laggard, according to Forrester, which says IT consulting services will lag slightly behind the software growth at an expected 7% increase, or $86 billion, most of which is expected in the second half of 2010.

Separately, Gartner forecasts worldwide IT spending to reach $3.4 trillion in 2010, representing a 5.3% increase from IT spending of $3.2 trillion in 2009…..The IT industry will continue to show steady growth with IT spending in 2011 projected to surpass $3.5 trillion, a 4.2% increase from 2010.  The research firm also points to hardware as a key driver to IT spending.  For instance, worldwide computing hardware spending it forecast to reach $353 billion in 2010, a 5.7% increase from 2009.  “Computing hardware suffered the steepest spending decline of the four major IT spending category segments in 2009.  However, it is now forecast to enjoy the joint strongest rebound in 2010,” said George Shiffler, research director at Gartner, in a statement.  “Consumer PC spending will contribute nearly 4 percentage points of hardware spending growth in 2010, powered by strong consumer spending on mobile PCs.  Additionally, professional PC spending will contribute just over 1 percentage point of spending growth in 2010 as organizations begin their migration to Windows 7 toward the end of the year.”  Gartner also notes a more than 5% increase in worldwide software spending, totaling $232 billion in 2010…..The infrastructure market, which includes all the software to build, run and manage an enterprise, is the largest segment in terms of revenue and the fastest-growing through the 2014.  The hottest software segments through 2014 include virtualization, security, data integration/data quality and business intelligence.  The applications market, which includes personal productivity and packaged enterprise applications, has some of the fastest-growth segments.  Web conferencing, team collaboration and enterprise content management are forecast to have double-digit compound annual growth rates (CAGR), in the face of growing competition surrounding social networking and content.  “Cost optimization, and the shifts in spending form mega suites to the automation of processes will continue to benefit alternative software acquisition models as organizations will look for ways to shift spending from capital expenditures to operating expenditures,” said Joanne Correia, managing vice president at Gartner.  “Because of this, vendors offering software as a service (SaaS), IT asset management, virtualization capabilities and that have a good open-source strategy will continue to benefit.  We also see mobile-device support or applications, as well as cloud services driving new opportunities.”

The worldwide IT services industry is forecast to have spending reach $821 billion in 2010, up 5.7% from 2009.  The industry experienced some growth in reported outsourcing revenue at the close of 2009, an encouraging sign for service providers, which Gartner analysts believe will spread to consulting and system integration in 2010.  “We continue to see a long-term recession ‘hangover’ as a more-cautious mind-set continues as the norm among a lot of buyers who keep looking for small, safe deals where cost take-out is a key factor, said Kathryn Hale, research vice president at Gartner.  “In the face of that ongoing strong pressure to renegotiate contracts, and in the absence of equivalent pressure from stockholders, we believe vendors will generally choose to maintain margins over revenue growth.”  Worldwide telecom spending is on pace to total close to $2 trillion in 2010, a 5.1% increase from 2009.  Between 2010 and 2014, the mobile device share of the telecom market is expected to increase from 11% to 14%, while the service share drops from 80% to 77% and the infrastructure share remains stable at 9% of the total market.  Worldwide enterprise network services spending is forecast to grow 2% in revenue in 2010, but Gartner analysts said this masks ongoing declines in Europe and many other mature markets as well as an essentially flat North American market.  “Longer term, the global enterprise network services market is expected to grow modestly, largely on the back of growth in Internet services, such as hosting,” said Peter Kjeldsen, research director at Gartner.  “Ethernet services will also grow significantly, albeit at the expense of both legacy services and multiprotocol label switching (MPLS).”

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