Reports: No Sign of Tech Spending Rebound

An expected upturn in spending on information technology is taking longer than anticipated to materialize, and the sector will post much weaker growth than previously forecast for 2002, according to two new reports.

At its annual meeting of IT executives and industry analysts in Orlando, Florida, Gartner said 2002 IT spending will total US$2.3 trillion worldwide, up just 3.4 percent from last year. The research firm also noted its latest data reveal few signs that tech spending will rebound within the next nine months.

“Our forecast shows that we are unlikely to see anything beyond normal seasonality before the second quarter of 2003,” said Gartner principal analyst George Shiffler.

Bad to Worse

Further evidence that 2002 is shaping up to end with a whimper came from IDC, which reduced its forecast for growth this year in the IT services sector. According to IDC, 6.7 percent growth is now expected, down from the nearly 11 percent predicted earlier this year.

IDC research manager Ned May told the E-Commerce Times that the change reflects the fact that an expected rise in demand has been pushed back. The firm previously had lowered its 2002 forecast for PC sales as well.

“We anticipated demand would start to head up in the middle of 2002, and we now think late 2002 is more likely,” May said. “We don’t see a full recovery until spring of 2003.”

IDC’s longer-range forecast is sunnier, with annual growth rates of more than 10 percent forecast through 2006, May noted.

Bright Spots

Even Gartner expects 2003 to be an improvement overall, with spending rising 7 percent over current levels to about $2.4 trillion.

When spending does turn around, it probably will begin with lower-cost items, such as PCs, servers and infrastructure software, Gartner’s Shiffler said, indicating the recovery will be a mild one. In addition, he cautioned, “The global economic situation is quite fluid, and given the rising uncertainty surrounding the strength of global economic recovery, there are still significant downside risks to the industry.”

Ring, Ring

Despite its woes, telecommunications is still the strongest sector within the tech industry worldwide, making up more than 58 percent of 2002 IT spending. Hardware will finish second in terms of overall spending, but actually will see a slight decrease in dollars spent this year, according to Gartner.

In fact, Gartner vice president Dean Evers noted that without telecom’s 9 percent growth rate, worldwide IT spending would actually contract by .5 percent this year.

While the software industry is expected to return to positive growth in 2002, different areas within that sector will recover at different rates, with most demand focused on infrastructure software that can help enterprises unlock the value of earlier IT investments.

Last week, IDC predicted “moderate growth recovery” for software in 2003, with a 10 percent expansion in sales likely.

Ch-Ch-Ch-Ch-Changes

While spending may be weak, technology improvements continue to clip along, with strong gains in bandwidth capacity and processor speed.

Such innovation may spell more economic trouble, however, as productivity enhancements will enable companies to accomplish more with fewer workers, Gartner noted.