Forrester: Why IT spending will turn around next summer

Forrester Research is now forecasting an IT spending growth rate of just 1.6 per cent in the U.S. next year, down from its earlier projection of a 6.1 per cent increase. But the market research and consulting firm thinks a turnaround will begin by the summer.

In a report issued Tuesday, Forrester analyst Andrew Bartels - who also reduced his spending growth forecast for this year to 4.1 per cent - outlined four reasons why the turnaround will occur.

First, he said, the steep drop in the price of gas from last summer's record-high levels(AAA puts the national average for regular unleaded at $US1.73 per gallon) means lower energy costs for transportation, logistics and chemical companies, in particular. Less money spent on fuel may mean more money for technology investments.

Also on Bartel's list:

Falling interest rates will lead to improvements in the financial performance of banks and investment firms, leading to a "modest revival" in their IT purchases by late 2009, he predicted. The lower interest rates will enable companies in many sectors of the economy to make room in their budgets for capital-intensive purchases, according to Bartels.

Major export markets such as Brazil, Russia, India and China - the so-called BRIC countries - are still growing. The dollar has gained value during the economic crisis because it's seen as a safe haven, but Bartels believes the dollar will come down a bit relative to other currencies as the problems abate, which in turn should help exports.

President-elect Barack Obama 's economic stimulus plan may include $700 billion to $800 billion in new investments, many of which will involve technology. Targeted verticals will include education (imagine electronic "smart boards" instead of chalkboards), health care and energy, the latter with an array of new initiatives that will rely on IT.

One thing that could upset the recovery forecast, Bartels said in an interview, is the psychological impact of the steady diet of economic bad news. "There is so much doom and gloom it could almost become a self-fulfilling prophecy," he said.

For instance, InvestorPlace Media LLC's ChangeWave market research subsidiary recently released data from a November survey of nearly 2,000 respondents on their IT spending plans. According to ChangeWave, 45 per cent of respondents said that their companies will reduce IT spending or not make any tech purchases at all during next year's first quarter.

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Patrick Thibodeau

Computerworld (US)

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