Forrester: Tech Downturn 'Unofficially Over'

Forrester Research forecast for high-tech spending in 2010 promises a return to purchasing after a dismal downturn caused many cutback in 2009.

The U.S. IT market will grow by 6.6% as high-tech spending rebounds in 2010, according to Forrester Research's latest estimates.

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The research firm based its projections on data reported for 2009, though its fourth quarter numbers are incomplete. Forrester says hints of a recovery surfaced in the third quarter, and now the company expects the global IT market to grow by 8.1% in 2010.

"The tech downturn of 2008 and 2009 is unofficially over," Forrester's "U.S. and Global IT Market Outlook: Q4 2009" reads. "While the Q3 2009 data for the U.S. and the global market showed continued declines in tech purchases (as we expected). We predict that the Q4 2009 data will show a small increase in buying activity, or at worst, just a small decline."

Forrester points to reports from Oracle and Accenture as evidence of the recovery. Oracle posted a 4% increase in global revenues, while Accenture experienced an 11% decrease in Q4 global revenues but remained "cautiously optimistic for 2010."

"The financial crisis and the related focus by businesses conserving cash caused big cuts in capital investments of all kinds, including computer and communications equipment and licensed software. IT services held up better for a while, but the drop in licensed software purchases led to a similar drop in systems integration project work to implement that software," the report reads. "Only IT outsourcing was able to eke out a small increase of 2.1%"

Forrester estimates that U.S. software spending could grow by 9.2% in 2010, reversing the 7.4% decline in 2009 and potentially putting software purchases above 2008 levels. Computer equipment spending is also expected to see a 9.2% increase in the coming year, but the level of purchases will remain lower than in 2008 and 2007, Forrester says. And communications equipment will experience a "more modest" recovery with an expected spending increase of about 2.8%, leaving purchasing in that area below 2008 and 2007 levels. IT consulting services will experience 5% growth and IT outsourcing a little less than 4% in 2010, according to Forrester.

Despite the optimistic outlook on IT spending and an economic recovery, Forrester doesn't discount the potential for further financial disaster in 2010. The research firm points to continued unemployment and cutbacks in government stimulus programs that could cause business investments and consumer spending to drop.

"The most likely alternative to our forecast that the U.S. and global IT markets will recover in 2010 is a faltering tech market due to a double-dip recession that returns in 2010 after a brief two- to three-quarter economic recovery," the report reads. "Should this happen, U.S. tech purchases would decline by 3% to 4% in 2010, with a second-half decline offsetting a first-half tech revival."

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This story, "Forrester: Tech Downturn 'Unofficially Over'" was originally published by Network World.

Copyright © 2010 IDG Communications, Inc.

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