IT spending: The true story

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Cheer for outsourcing

Mail to friend IT outsourcing could buck the overall gloomy trend, clocking a moderate growth in 2009 and 2010. According to Forrester there is some cheer for IT outsourcing vendors. The report predicts that while consultancy and systems integration will slip, IT outsourcing growth will be small, but positive at 2.1 percent. It could improve to 6.8% on 2010. The fact that outsourcing would provide cost reduction opportunities will help in its growth globally. This is likely to be a big boon for Indian IT companies.

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Worse than 2001
	Mail to friend Worldwide IT spending to total $3.2 trillion in 2009, a 3.8 per cent decline from 2008 revenue of nearly $3.4 trillion, according to Gartner Inc. The IT market slowdown in 2009 will be worse than the 2.1 per cent decline in IT spending in 2001 when the internet investment bubble burst.

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Pain points

Mail to friend IT organisations worldwide are being asked to trim budgets, and consumers are cutting back on discretionary spending. Consumers and businesses will continue switching to lower-cost products, extending the life of existing devices and extending their current contracts and purchasing agreements. Although government stimulus packages will likely be important in the long term, they will not be able to offset this bleak near-term outlook.

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Slow replacement activity
	Mail to friend The slowdown in IT spending will reduce new market penetration and will slow replacement activity. The impact of reduced new sales will be more strongly felt in emerging markets, while the impact of reduced replacement activity will be more strongly felt in mature markets.

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Forecast 2010

Mail to friend According to Forrester, IT outsourcing was weak in 2008, with 2.8% growth as the economic uncertainty froze potential clients increased competition and small-scale projects cuts prices. The recession made prospects wait to see if the prices would go further down. Similar forces are expected to continue to affect the IT spending in first-half on 2009. However, revenues will start improving in 2010. Growth in 2009 will be small but positive. It is likely to improve to 6.8% in 2010.