End to tech slowdown is in sight

Downturn may not last out the year, says research firm, but IT spending could still fall further
Written by Jane Wakefield, Contributor

The US economic downturn, precipitated by the bursting of the dot-com bubble, will improve within a year, according to research firm IDC.

IDC expects US IT spending growth to slow to seven percent in 2001, down from 11 percent last year. If the economy continues to deteriorate this could fall as low as five percent, with hardware bearing the brunt of the downfall.

"Evidence suggests that software and services are more resistant to a downturn in the economy than hardware," said IDC's senior analyst Kevin White. "Hardware may be more vulnerable because of the cyclical nature of business investment and household spending on consumer durables."

The good news is that IT spending will begin to pick up in 2002, predicted White. "The tumbling Nasdaq triggered a vicious circle in which lower stock values dampened IT speonding and contributed to a broader economic downturn that, in turn, has put more pressure on technology spending and share prices," he said.

"However the fundamentals underpinning IT investment remain strong, and this factor, along with a rebound in the economy, will restore IT spending in 2002 and beyond."

The Internet was identified as one of the main factors that will curb the IT spending slowdown. "The long-term trends in e-commerce and Internet usage are strong," said White. "The expansion of their use will benefit not only Internet companies and retailers but also hardware and software vendors whose products power the Internet."

Despite some positive results from Apple, AOL and Intel April was a bad month for tech employees, with 45,500 jobs lost wordwide

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