According to a Computer Economics assessment of IT spending patterns during the previous two recessions, IT spending growth will remain flat through 2009 but will begin to recover in 2010.
The IT research and advisory firm said that its analysis of IT spending trends shows that businesses began restraining spending in late 2007, in anticipation of the downturn, and should be ready to renew IT investments by next year.
“Over the past two decades, the negative impact of recessions on IT spending has never lasted more than two years,” said Frank Scavo, president of Computer Economics, in a press release. “If the pattern of recovery holds true today, we should see a modest increase in IT equipment and software investment in 2010.”
Scavo also said that in root causes the current recession bears remarkable similarities to the 1990 recession, which, as today, was led by the financial sector. However, a return to double digit growth in IT spending as occurred after the 1990 recession is highly unlikely, as growth then was fueled by Y2K and the Internet boom.
Among the report’s other findings and forecasts:
IT equipment and software investment: Assuming the pattern of recovery after the 2001 recession holds true today, expect a return to growth in the range of 5% to 10% in 2010.
Forecast for IT capital budgets: By 2010, many IT buyers will have delayed normal equipment refresh cycles and major new initiatives for two years. Computer Economics expects median annual growth in IT capital budgets in 2010 to rebound to between 4% and 5%; roughly at the level of growth seen in 2006 and 2007. A rebound in capital spending will be further aided by low interest rates and availability of credit to financially sound organizations.
Forecast for IT operational budgets: The current recession is more like that of 1990 than 2001 in that IT organizations have cut operational budgets quickly in response to declining economic conditions. Assuming the pattern after the 1990 and 2001 recessions holds, Computer Economics expects between 60% and 65% of IT organizations will increase IT budgets in 2010. Based on the pattern shown after the 2001 recession, median IT operational budgets should grow 2% to 3% in 2010.
Forecast for IT spending as percentage of revenue: IT executives have been restraining IT spending for the past two years. This reflects the atmosphere of cost containment that has prevailed in many IT shops during this decade. If the pattern of recovery after the 2001 recession repeats itself, Computer Economics anticipates median IT operational spending to reach 1.8% in 2010 and possibly 2.0% in 2011.
The executive summary of the study, IT Spending in Recessions: 2009-2010 Forecast, is available at http://www.computereconomics.com.