Financial Forecast: IDC Revises 2009 IT Spending Forecast Downward Again

Market researchers at IDC, who produce one of the most widely watched forecasts for IT spending, have revised the forecast for 2009 -- and it's "downward ho."

The research firm released the new projection in late February, revising a forecast first released in August that was later substantially downgraded in a revision released in November, as global economic conditions deteriorated.

"Fourth quarter data from a number of key markets and geographies clearly shows that companies have been very quick to pull back their spending," John Gantz, chief research officer at IDC, said in a statement describing the new forecast.

"The data also provides a clearer picture of how companies are curbing their expenditures," Gantz said. "Investments in software and services are being maintained in pursuit of productivity and efficiency gains while hardware spending is being slashed in an attempt to stretch refresh cycles and squeeze more out of existing assets."

IDC now forecasts that worldwide IT spending will total $1.44 trillion in 2009, an increase of 0.5 percent over 2008. That's down from IDC's 2.6 percent growth forecast from November and way down from the 5.9 percent growth IDC had anticipated in its August report.

Hardware Contracts
By far the biggest drag on the forecast is hardware. IDC now projects that global spending will contract in the hardware market by 3.6 percent. The hardest hit subsectors in hardware include servers, PCs and printers/multifunction printers. In November, IDC was still projecting global hardware sales to grow, but by a tiny 0.5 percent.

The new projection calls for software sales growth of 3.4 percent, down from a 4.6 percent growth expectation in November. IT services are now also expected to grow by 3.4 percent, down from an earlier expectation of 3.7 percent growth.

Sinking Confidence
The revised IDC forecasts were released about the same time as IDC's quarterly Channel Panel survey, which found that channel companies who resell PCs reported lower confidence in their business in the fourth quarter of 2008.

The finding continues a trend of sinking confidence among channel companies throughout 2008 that basically lines up with the official determination that the economy peaked and began its decline in December 2007, said John Grady, research analyst for hardware channels at IDC.

"We focused on the PC segment because it's a concise view of the overall survey," Grady said.
He also added that the Channel Panel results aligned with IDC's overall market forecast-plunging hardware sales accompanied by weak growth in software and services. "Customers that have moved to managed services-it's a set-in-stone contract. With break-fix, you can't get away. If something's broken you have to fix it," Grady explained. "If you're looking to buy a PC, I think it's a little easier to push off."

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.