Economic uncertainty foils Gartner forecast

Analyst house says it had to revise global IT budget forecast, due to changes in CIO sentiments, and widen growth variance to cater to greater unpredictability.
Written by Liam Tung, Contributing Writer

Analyst firm Gartner has found itself short of an explanation to give IT managers about what to expect from the financial crisis and economic downturn.

At the analyst house's annual Symposium/ITxpo in Sydney on Tuesday, Gartner predicted that IT budgets across the globe will increase in 2009--albeit by as little as 1.1 percent for Europe and 8.3 percent for the Asia-Pacific region. However, sudden changes in sentiment in recent months have buckled the stability of Gartner's forecasts.

Head of research Peter Sondergaard on Tuesday said that Gartner had to revise its global IT-budget forecast figures--due in early 2009--which are based on estimates given by over 400 CIOs .

Two weeks after the collapse of U.S. investment firm Lehman Brothers, hundreds of CIOs surveyed by Gartner said they expected IT budgets to grow by 3.3 percent in 2009. Two weeks ago, however, CIOs gave much lower expectations, resulting in Gartner revising its forecast down to 2.3 percent growth.

"So it's clear that, whatever this is, it's a stake in the ground. We call it the best-case scenario. Our worst-case scenario is that IT budgets may end up declining globally, but would likely not go anywhere beyond the negative 2.5 percent," Sondergaard said.

To cater for greater unpredictability, Gartner has widened its possible IT-budget growth scenarios from a variance of 1 percent to more than 3 percent. "IT-market growth drops from 8.9 to 7.3 percent in 2008 and from 5.8 to 2.3 percent in 2009," Gartner reported in its October figures.

While Gartner is certain that IT budgets will slow, Sondergaard did not venture to guess for how long they will head south.

"Your guess is as good as anybody else's," he told journalists. "The only thing we know is that recessions since WWII have lasted no longer than three quarters, but that doesn't mean this one won't last longer," he said.

The good news for IT departments in the coming year, according to Sondergaard, is that technology budgets generally lag the broader economy by around six months, or two reporting quarters.

The other element protecting technology spending is its "stickiness"--IT runs the business and therefore cannot be switched off, while spending on software maintenance, for example, is reviewed annually.

"So you can't just cut budgets, even if you need to move budgets elsewhere immediately," he said. "I mean, you can violate a contract, but generally companies adhere to the cycle of renewal which would be annual or may in fact be multi-year contracts. So the impact is slower on software maintenance, service contracts and people, with varying degrees around the world, which aren't as easy to cut back," he said.

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