Enterprises Will Loosen Purse Strings for IT in 2010

Enterprises worldwide will begin spending a little more on IT in 2010, according to market analyst firm Gartner.

However, businesses will hold off on hardware purchases, instead spending money on software, telecommunications and IT service, according to Gartner’s predictions.

Going for the Growth

IT spending growth will occur in three areas in 2010 — telecommunications, IT services and software — Gartner analysts said at the research firm’s symposium and IT expo, being held through Thursday in Orlando, Fla. Hardware spending will remain flat.

However, the market may not fully recover to 2008 revenue levels until 2012, said Peter Sondergaard, senior vice president at Gartner and global head of research. “2010 is about balancing the focus on cost, risk and growth. For more than 50 percent of CIOs, the IT budget will be 0 percent or less in growth terms. It will only slowly improve in 2011,” he explained.

Spending will be strong in emerging regions, and that will reshape the IT industry, Sondergaard said. “By 2012, the accelerated IT spending and culturally different approach to IT in these economies will directly influence product features, service structures, and the overall IT industry. Silicon Valley will not be in the driver’s seat anymore,” he said.

Some of the changes will be an increased demand for remote management capabilities and more robust, redundant systems that are offered at a low price, Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times. “These regions have a vastly higher requirement for high-efficiency hardware and solutions because they lack reliable power,” he said.

“Also, businesses in these regions have limited trained resources on-site, so they require stronger remote management capabilities,” he added. “However, labor is inexpensive, allowing for more flexible physical deployment options, and the environment tends to be more hostile, suggesting the systems will need to be both more redundant and more robust. Since cash is in short supply, cost focus will be exceptionally high as well.”

Doling Out the Shekels

In 2010, telecom spending will grow 3.2 percent from its projected 2009 figure of US$1.9 trillion; IT services will be up 4.5 percent from their projected 2009 level of $781 billion; and software spending will increase by 4.8 percent.

Gartner expects hardware spending to decline 16.5 percent and total $317 billion for 2009, then stay flat in 2010. However, this prediction may not pan out, Enderle said.

“The difficulty with trend-based forecasts is they don’t take into account unknown future events like platform updates, stimulus dollars or regulation, which can either improve or hurt that outlook,” he explained. “Given that desktop hardware is supposed to increase next year and many firms do desktop and server upgrades in tandem, this suggests Gartner’s hardware numbers are excessively pessimistic.”

Hobbled Hardware Hurts

If the prediction does pan out, however, businesses could be in for some frustration. An unwillingness to buy new hardware means they will be stuck with aging equipment, which is likely to fail more often than new hardware. Enterprises must begin assessing the impact of increased equipment failure rates, Gartner said. They may also need to re-think their equipment write-offs to see if these need adjusting.

About 1 million servers, or three percent of the global installed base of servers, are a year over their replacement schedule, according to Gartner. In 2010, that figure will rise to at least 2 million, the firm predicts.

By 2011, about 10 percent of the installed server base worldwide, or more than 3 million units, will be beyond their scheduled replacement dates unless enterprises change their replacement cycles, Gartner’s Sondergaard warned. This will impact enterprise risk calculations.

“Typically, the risk will be unacceptable once failure rates are forecast to reach unacceptable levels and/or when the cost of maintaining the aging hardware exceeds a set threshold,” Enderle said. “A large percentage of companies are already uncomfortably close to this failure/cost threshold, suggesting many will not be able to hold for more than a couple of years.”