IT ‘faces global decline’ for 2009

A raft of poor news in the IT sector has led analysts to say this will be a difficult year in the industry.

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A raft of poor news in the IT sector has led analysts to say this will be a difficult year in the industry.

In recent company news, Nortel Networks declared bankruptcy and a range of vendors including Intel, Nvidia, and Motorola issued dour financial reports or cut staff.

Up to now, most industry insiders believed that while the macroeconomy would suppress consumer and corporate spending and curb revenue growth for IT vendors, it would not lead to an absolute, overall decline in spending on technology. The thinking was that in the wake of the dot-com bust many businesses trimmed their IT budgets, and considering how important tech has become to mission-critical systems, there was not much more room to cut.

But as the macroeconomy continues to slide, the conventional wisdom is changing. In a research note entitled "Rose Coloured Glasses Come Off," issued early this week, Citi Investment Research said a survey of 200 CIOs it conducted from mid-November to mid-December showed that the US executives on average expect a 2.7 percent contraction in IT budgets, while the Europeans expect budgets to shrink by 1.9 percent.

A larger, global CIO survey, released by Gartner Thursday, reported that going into 2009, corporate IT spending budgets are essentially flat. The poll of 1,527 CIOs found a total planned increase of 0.16 percent in global budgets for 2009 - flat across enterprises in North America and Europe, with slight increases in Latin America and a slight decrease in Asia/Pacific.

Meanwhile, overall worldwide consumer and business spending on IT products and services as measured in dollars will drop by 3 percent in 2009 to $1.66 trillion, according to a Forrester Research study released Tuesday.

Though the recession is the main reason for the decline, part of the drop is the result of the dollar strengthening against the euro. As measured in euros, IT spending will experience a slight rise, Forrester said.

But no matter how it is measured, the IT market is due for an annus horribilis in the face of an eroding economy. The bad macroeconomic news continued Thursday when the US Labour Department announced that initial claims for unemployment insurance benefits increased by 54,000 to 524,000, after seasonal adjustments, in the week that ended Saturday.

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