Gartner Calls for Grim Spending Contraction

Gartner’s latest analysis of the direction of global IT spending during 2009 released March 13, includes significant downward revision to its last market growth forecasts, which were made at year-end 2008. In an advance look at its forthcoming 1Q09 update, Gartner’s preliminary forecast is that IT spending during 2009 will decline by 3.7%.

The sharp global economic deceleration during 2009 will include a slowdown in IT spending in hardware, software, IT services and telecommunications that, overall, exceeds the decline that the IT industry experienced during 2001. Results from the full-year 2008 and 4Q08 vendor financial statements and our analysis of Gartner Customer Insights end-user inquiry data reveal concerns restricting IT spending across the globe, especially in the U.S. and Western Europe.

Historical analysis offers only limited insight because common historical patterns are not being repeated.

Overall economic growth, gross domestic product (GDP), is forecast to contract 1.2% in 2009 after growing 2.3% in 2008, which represents the sharpest slowdown in the global economy since 1982. Although government stimulus packages will likely be important in the long term, they will not be able to offset this bleak near-term outlook. Until global financial markets stabilize, global GDP growth, including IT spending, is unlikely to strengthen.

As a result:

• The slowdown in IT spending will reduce new market penetration and will slow replacement activity.

• The impact of reduced new penetration will be more strongly felt in emerging markets, while the impact of reduced replacement activity will be more strongly felt in mature markets.

• Consumers and businesses will continue switching to lower-cost products, extending the life of existing devices and extending their current contracts and purchasing agreements.

However, IT is essential to running most businesses. Supporting current complex IT installations is both necessary for continued operations and a strategy for slowing down technology refresh cycles. As global economies continue to decline sharply, IT organizations worldwide are being asked to trim budgets. Plan for business and consumer spending to be curtailed during 2009 and for as low, prolonged recovery during 2010. At the same time, be alert to opportunities to help buyers with cutting costs, complying with new government regulations and taking best advantage of government rescue plans.