Gartner: IT Spending to Rebound Next Year With 3.3 Percent Growth After Disastrous 2009

The IT industry is exiting its worst year ever, as worldwide IT spending is on pace to decline 5.2 percent, according to Gartner.

Worldwide enterprise IT spending will struggle more with IT spending dropping 6.9 percent. The IT industry will return to growth with 2010 IT spending forecast to total $3.3 trillion, a 3.3 percent increase from 2009. While IT spending will increase next year, Gartner cautioned IT leaders to be overly optimistic.

The computing hardware market has struggled more than other segments with worldwide hardware spending forecast to total $317 billion in 2009, a 16.5 percent decline. In 2010, spending on hardware spending will be flat. Worldwide telecom spending is on pace to decline 4 percent in 2009 with revenue of nearly $1.9 trillion. In 2010, telecom spending is forecast to grow 3.2 percent. Worldwide IT services spending is expected to total $781 billion in 2009, and it is forecast to grow 4.5 percent in 2010. Worldwide software spending is forecast to decline 2.1 percent in 2009, and the segment is projected to grow 4.8 percent in 2010.

On a regional basis, emerging regions will resume strong growth. “By 2012, the accelerated IT spending and culturally different approach to IT in these economies will directly influence product features, service structures, and the overall IT industry. Silicon Valley will not be in the driver’s seat anymore,” Mr. Sondergaard said.

From a budget perspective, there are three important items that IT leaders must consider in 2010:

1. A Shift from Capital Expenditure to Operational Expenditure in the IT Budget — Concepts such as cloud services will accelerate this shift. IT costs become scaleable and elastic. CIOs need to model the economic impact of IT on the overall financial performance of an organization. For public companies, they must show how IT improves earnings per share (EPS).
2. Impact of the Increased Age of IT Hardware — With delayed purchases of servers, PCs and printers likely to continue into 2010, organizations must start to assess the impact of increased equipment failure rates, and if current financial write-off periods are still appropriate. Approximately 1 million servers have had their replacement delayed by a year. That is 3 percent of the global installed base. In 2010, it will be at least 2 million. “If replacement cycles do not change, almost 10 percent of the server installed base will be beyond scheduled replacement be 2011,” Mr. Sondergaard said. “That will impact enterprise risk. CFOs need to understand this dynamic, and it’s the responsibility of the CIO to convey this in a way the CFO understands.”
3. IT Must Learn to Build Compelling Business Cases — 2010 marks the year in which IT needs to demonstrate true line of sight to business objectives for every investment decision. IT leaders can no longer look at IT as a percentage of revenue. CIOs must benchmark IT according to business impact.

Mr. Sondergaard said three additional topics that were important in 2009 will continue to dominate IT leaders’ agendas in 2010. These three topics include

• Business Intelligence — Users will continue to expand their investments in this area with the focus moving from “in here” to “out there”
• Virtualization — IT leaders should not just invest in the server and data center environment, but in the entire infrastructure. In 2010, users will create the cornerstone for the cloud infrastructure. They will enable the infrastructure to move from owned to shared.
• Social Media — Organizations are starting to scale their efforts in this space. The technologies are improving and organizations realize this is not only about digital natives. It’s about all client segments including the most significant: the population in the next 10 years, the above 60 year old generations.

While those topics are key to IT agendas today, Mr. Sondergaard highlighted three themes that will become important going forward. They include:

• Context-Aware Computing — This is the concept of leveraging information about the end user to improve the quality of the interaction. Emerging context-enriched services will use location, presence, social attributes, and other environmental information to anticipate an end user’s immediate needs, offering more sophisticated, situation-aware and usable functions.
• Operational Technology (OT) — OT is devices, sensors, and software used to control or monitor physical assets and processes in real-time to maintain system integrity. The rapid growth of OT is increasing the need for a unified view of information covering business process and control systems. OT will become a mainstream focus for all organizations.
• Pattern-Based Strategy — This is a new model about implementing a framework to proactively seek, model, and adapt to leading indicators, often termed “weak” signals, that form patterns in the marketplace, and to exploit them for competitive advantage. A Pattern-Based Strategy will allow an organization to not only better understand what’s happening now in terms of demand, but also to detect leading indicators of change, and to indentify and quantify risks emerging from new patterns rather than continuing to focus on lagging indicators of performance.