Gartner: Global software budgets will grow next year

While the U.S. market will remain sluggish, other geographies should fare better, the report says

A new report by Gartner showing that software spending will increase worldwide next year indicates there may be truth to the general belief that the technology market has hit bottom.

According to results of a Gartner survey of about 1,000 IT professionals worldwide conducted during April and May, 28 percent of companies in North America expected to increase their software budgets in 2010, while 25 percent of companies in Europe, Middle East and Africa (EMEA) and 30 percent in the Asia/Pacific region expected the same.

"We're at a turning point," said Joanne Correia, managing vice president at Gartner and the lead analyst on the survey. She said it was conducted during those months because that was about the six-month point after the global economy went into crisis and companies had some time to plan their way through it.

"Everybody has been through six months of 'What am I going to do?'" she said. "We wanted to get a good idea of what their tone was going to be."

Many second-quarter financial results for major sellers of software such as Microsoft and IBM showed a decline in year-over-year revenue in that segment. However, companies in general reported that though they were not out of the woods financially yet, there would be growth over the next year.

Correia said Gartner's report supports an overall cautiously optimistic tone. While it appears that companies' software budgets have bottomed out and are on the rise, she warned people not to expect anything dramatic yet. "We're crawling out of the hole," Correia said.

Despite this bit of good news, software spending in general is still expected to be on the decline in North America, though other geographies are expecting a slight bump, according to the report.

Software spending in North America is expected to decline 2.06 percent in 2010, with EMEA showing slight positive growth at 0.45 percent, Gartner reported.

The U.S. in particular "is a little more negative than the rest of the world," Correia noted. However, that market "has bottomed out" and companies will start adding money to IT budgets.

Certain economic factors over in the U.S. have made it a more challenging environment for IT growth, such as the collapse of its financial and manufacturing markets, Correia said. The financial industry represents about 21 percent of software spending in the U.S., and the manufacturing industry represents about 15 percent to 18 percent, she said.

In fact, mature markets in general will show slower growth next year, which is also why growth in the region that includes Europe also will continue to be sluggish, she added.

Software budgets in Latin America and Asia/Pacific should fare better, however, with a rise of 2.54 percent in the former region and a rise of 4.34 percent in the latter, according to the report.

Emerging markets like Asia and Central America -- where countries like China, India and Brazil are working on modernizing their IT infrastructure -- will have more growth because of this development, Correia said.

Gartner in particular polled IT professionals in China and India for the survey, which could account for why it shows a fair amount of growth in Asia, she added.

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Elizabeth Montalbano

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