Tech Spending To Grow Despite Economic Worries

Global IT spending will continue to be relatively strong through the end of 2011, according to analysts at Forrester Research.

However they did admit growth will slow down in 2012.

Forrester analysts in July were preparing to release their second-half IT projections, but put those on hold to see how certain global issues played out, in particular the debt ceiling debate in the United States and the ongoing economic crisis in Europe.

2012 Slowdown

With a better idea of the direction of those and other issues, Forrester analysts said 20 September that worldwide IT spending will increase 11.5 percent in 2011. While it will slow in 2012, there still will be 5.5 percent grow, they said.

In the United States, the difficult economic climate won’t really hit the IT market until the fourth quarter and going into 2012, Forrester analyst Andrew Bartels said in a blog post 20 September. A number of factors – from the slowing gross domestic product numbers to the contentious debt ceiling debate to the stalling job numbers – have conspired to hamper any economic recovery.

“Still, the first two quarters saw strong tech market growth, and the economic weakness that surfaced in July and August won’t be enough to cause any slowing in tech growth until Q4 2011,” Bartels wrote. “While the risk of renewed recession has certainly increased, we think that the most likely scenario is very low, but still positive, economic growth.”

The situation in Europe is more difficult, he said. A number of countries – particularly Greece, but also Italy, Portugal and Spain – are dealing with high debt and low growth, as well as what Bartels called “structural rigidities,” all of which could have a domino effect on banks, which could trigger another financial crisis similar to what hit in 2008 after Lehman Brothers folded.

“The only good news for the tech market in this dire picture is that the heavily indebted countries are relatively small parts of the European tech market, where the healthier economies of the Nordics, the UK, Germany, France, Benelux, Austria and Switzerland are also much bigger buyers of tech goods and services,” Bartels wrote.

Given that, growth in Europe in 2012 will be 4.3 percent, less than Forrester’s earlier projection of 6.8 percent.

Growth Forecasts

In contrast to what will happen in the United States and Europe, emerging markets such as Latin America, and Eastern Europe, Middle East and Africa (EEMEA) will see double-digit growth, he said. EEMEA will be buoyed by high prices of oil and natural resources this year and next, while Latin America will benefit from its natural resources and manufacturing exports.

The weak US dollar also will benefit Canada, Western and Central Europe, and Asia Pacific, according to Forrester. However, Asia Pacific could see slower growth in 2011 due to the fallout from the earthquake and tsunami that hit Japan in March. That said, there will be a strong recovery-related rebound in growth in 2012.

Worldwide, all tech categories will see double-digit growth in 2011, but slower growth next year, according to Forrester.

“Software and computer equipment will have the highest growth in 2011, both with 11.9 percent increases,” Bartels wrote.

In 2012, as all sectors slow, IT consulting and systems integration will have the strongest growth of 6.6 percent, fuelled by the need for implementation projects from the strong software sales in 2011. Communications equipment will see the least growth in 2012, at about 4.7 percent, he said.