Company IT Spending Forecasts Brighten

Strong third-quarter corporate spending on technology continued to surprise experts, as Maven Wave Partners measured a 2% increase from Q2 spending levels. The consulting firm had been expecting about a 5% decrease. The strength of recent results also suggests continued upswings in 2012, it said.

Its earlier predictions of lower late-2011 IT spending had reflected a belief that companies would be digesting the sharp increases in IT investments made earlier in the year. But those predictions were upset by strong results — including a second-quarter rise that outpaced its expectations by 6%, with a large contribution coming from hardware sales. Tech spending increases earlier in 2011 had reversed the squeeze occasioned by the two-year financial crisis that began in 2008.

Other experts also have been predicting higher corporate IT spending and investment in workforce additions, although it has been noted that the very crush of spending could exacerbate a tightening of supplies in the area.

But as the current fourth quarter ends, and Maven Wave looks ahead, it is taking a positive view, in part to reflect the current momentum.

“For two quarters in a row, our model has suggested a pause in the growth of IT spending, and twice the market has surprised us with sequential increases,” said partner Brian Farrar. Analysts at Maven Wave “remain vigilant for a break in the action,” he said, with factors including “the continued overhang in the European sovereign debt market, a gridlocked U.S. Congress, and a potentially vigorous 2012 election cycle in the U.S.” Still, he added, because of the latest index numbers and the trend of surprises in the last two quarters, “the numbers to date bode well for 2012.”

The 2%-higher tech investment index number of 142.6 for Q3 was driven by higher hardware sales and workforce spending, Maven Wave said. And its “value index,” tracking corporate earnings and their relationship with IT spending, rose more than 8% from Q2, to $21.03. According to that measurement, $1 of IT workforce spending represents $21.03 of corporate profit.