April 1, 2009

Tech Spending In 09 May Beat Post-DotCom Low

As the list of financial victims brought down by the deteriorating economy grows, technology products and services join the ranks with an almost 4 percent decline in global spending, according to the research firm Gartner, the Associated Press reported. 

Gartner anticipates a slowdown across the board, followed by a 3.8 percent decline from 2008, to $3.2 trillion.  Hardware will suffer the sharpest drop, almost 15 percent compared with a 2.8 percent increase last year.  Spending on software, which can help companies retain money, is projected to remain nearly flat, rising less than half of 1 percent. 

The tech industry has not experienced a bust like this since the 2.1 percent drop in the 2001 dot-com downfall. 

Companies worldwide are feeling the crunch by implementing budget cuts and holding off on upgrades to newer computers.  Likewise, individual consumers are practicing discretionary spending. 

The research firm believes a "slow, prolonged recovery during 2010," is to be expected, said Richard Gordon, research vice president and head of global forecasting at Gartner. Government stimulus packages alone won't be adequate to repair the entire damage.

Forrester Research Inc. recalculated its expectation for U.S. spending on Tuesday due to the worsening economy.  New projections for U.S. business and government spending on technology products and services are expected to fall by 3.1 percent, rather than its previous forecast of 1.6 percent growth.  

Andrew Bartels, a Forrester Analyst said that the credit crackdown has handicapped technology spending more than the recession.

"Companies are so afraid they won't be able to borrow if they need to (that) they are going through extreme lengths to preserve cash," he emphasized.

Fortunately, Forrester indicated that expansion in tech spending should commence once again in the fourth quarter of this year, with a probability to "gather strength" in 2010. There is a restrained demand from companies that need to spend money on new technologies, Bartels informed. 

"Once the recession bottoms out, once the financial markets start to function more normally, that pent-up demand will start to resurface," he said.


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