Its a case of good news, bad news. Although worldwide IT spending is still on track to increase 3.9 percent and hit $3.350 trillion in 2010, that number falls short of earlier predictions for 5.3 percent growth, according to consultancy group Gartner. The primary culprit for the revised count is the declining value of the euro against the U.S. dollar over the last six months.
The European sovereign debt crisis is having an impact on the outlook for IT spending, Said Richard Gordon, research vice president at Gartner. The U.S. dollar has strengthened against the euro during the second quarter of 2010, and this trend will likely continue in the second half of 2010, which will put downward pressure on U.S.-dollar-denominated IT spending growth.
Gordon expects the hit to come from reduced public-sector IT spending as European governments struggle to balance budgets and reduce debt over the next decade. Such belt-tightening is expected to have ripple effects on the private sector firms that fulfill government contracts. And those ripples impact the U.S. markets too, as U.S.-dollar-denominated growth has declined, especially against the euro, in software, IT services and telecommunications.
Bright spots? PC growth remains strong, with computing hardware spending expected to hit $365 billion this year, up 9.1 percent from that of 2009. The strong showing for PCs is expected to continue through next year, driven by continued customer adoption of mobile PCs, and on the business side, migration to Windows 7 and natural replacement cycles. Year-over-year, though, Gartner found only 3.4 percent growth in telecom, 3.1 percent in software, and 2.9 in IT services.
Our latest IT spending forecast reflects the fact that the global economic outlook is stable but vulnerable to shocks in key regions and industries, which means that IT spending decisions are still scrutinized for value, said Gordon. CEOs are targeting 2010 as a return to growth year, and to enable growth strategies, CFOs expect increased IT spending. However, CIOE s are seeing only marginal increases in budgets and are constrained to essential enterprise IT spending with discretionary spending still on hold. In the consumer sector, confidence is improving, although consumers are still wary of the threat of unemployment.