No Slowdown in IT Spending: Gartner

Despite current economic concerns, worldwide IT spending will exceed $3.4 trillion in 2008, an increase of 8 percent from 2007 spending, according to Gartner researchers. But analysts also note that much of this growth is based on the decline in the U.S. dollar. The estimated worldwide IT spending growth expressed in constant currency is forecast to be approximately 4.5 percent.

“The U.S.-led economic downturn shows no sign of causing a recession in IT spending,” said Jim Tully, vice president and distinguished analyst at Gartner.

“Organisations are switching from company-owned hardware and software assets to per-use service-based models. This will impact the industry in various ways,” Mr. Tully said. “The projected shift to cloud computing, for example, will result in dramatic growth in IT products in some areas and in significant reductions in other areas.

Worldwide software spending is on pace for the strongest growth rate in 2008 at more than 10 percent. IT services spending ranks a close second with more than 9.4 percent growth.

“Most companies updated their software systems during the period 1997 through 2001, so we are in the middle of an upgrade cycle that should extend past the end of this decade,” says Joanne Correia, managing vice president at Gartner.

IT spending is dominated by services rather than products. Together, IT services and telecom services account for 70 percent of total IT market spending. Gartner analysts said the telecom sector has a major effect on overall IT market performance, accounting for almost $2 trillion in 2008. 

“Legacy telecom services have a dampening effect on sector growth, and therefore on the overall IT market,” said William Hahn, principal research analyst at Gartner. “The dominant size of the telecom services market guarantees that even with the forecast for relatively slow growth, it will still comprise over 44 percent of the IT market in five years time.”

The outlook for IT services market growth has improved despite macroeconomic uncertainty. “Spending in IT services is being supported by two main factors,” says Kathryn Hale, research vice president at Gartner. “Businesses are investing in improvements to internal processes aimed at reducing costs, while often maintaining some of the prior interest in innovation. The second factor is that globalization allows IT services providers to mitigate the risk of weakening demand by operating in more markets.”

The main area of hardware growth activity is PCs, which represents 60 percent of total hardware spending. Growth in PCs is stronger than previously expected, with no signs of a slowdown. The U.S. forecast has increased marginally while forecasts elsewhere, particularly Asia/Pacific and Western Europe, have increased significantly.