Forrester: IT spending will rebound in time for Windows 7 launch

IT spending declines were worse than expected; could herald early turnaround

Microsoft may be timing its October release of Windows 7 just about perfectly, if Forrester Research's mid-year IT forecast - improved spending by the end of the year - holds up. Forrester believes IT buyers are realising an ugly truth about this recession: They cut capital investment far more than they needed to. "We overreacted here," is how Forrester analyst Andrew Bartels describes what he believes is the collective assessment among IT buyers.

Forrester, in its update released today, expects global tech purchases to drop by 10.6 per cent this year compared to 2008. That's up from the 3 per cent spending decline it had envisioned at the start of the year and reflects, in part, the strong U.S. dollar.

In the U.S., Forrester expects a 5.1 per cent decline in IT spending versus its previous prediction of a 3.1 per cent drop for the year.

Bartels said the spending dip means that the economic damage "has mostly been in the past." He is basing that on GDP reports and data from some 40 tech firms, whose revenues have tended to "say similar things."

The potentially good news for Microsoft is this: The declines in PC and server spending began in early 2008. "You got companies running on almost two years of cuts," said Bartels. These firms can only put off upgrades for so long and be believes the upgrading will begin by year's end. In Forrester-speak, that means a coming "revival" for spending.

According to Bartels, a lot of companies planning on PC upgrades are now waiting for Windows 7. During previous releases of Windows, many enterprises held off on upgrades for a year or more. This time, customers may move faster to upgrade because Windows 7 is seen as "a release that fixes the problems with Vista," which many corporate IT managers avoided.

PC sales cratered in the most recent quarter.

Forrester believes the IT spending improvement will be broad-based, including software and services. In particular, services were paid for out of operational budgets and weren't hit as hard as capital spending.

Because IT spending really began to tank in the fourth quarter of last year, there doesn't have to be much growth to show year-to-year gains in the fourth quarter. "You don't have to have a big improvement to show positive numbers," said Bartels.

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Patrick Thibodeau

Computerworld (US)
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