IT Spending To Rise But Tablets Impact PC Sales

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Forrester and Gartner have forecast higher IT spending in 2011, but tablets will steal PC sales

The strong growth of software and mobile devices are set to hit hardware sales, despite an increase in global IT spending in 2011, according to Forrester Research and Gartner.

Global IT spending will grow 7.1 percent to $1.7 trillion (£1.09 trillion) in 2011, market research firm Forrester Research said in its latest forecast on 10 January. While the 2011 global tech market may “look similar” to the 7.2 percent market growth in 2010, the project growth for 2011 is “more impressive,” Andrew Bartels, Forrester Research vice-president and principal analyst, wrote on his blog.

IT capital investment as a whole bounced back in 2010 from the 2008-2009 recession and most of the 2010 growth was driven in part by deferred demand for replacement equipment, according to Bartels. In 2011, growth will reflect “new demand for IT goods and services, not pent-up demand from prior years,” he said. The growth rate for 2010 looks good because it was compared against weak 2009 spending, while 2011 will be “measured off a stronger base,” he said.

Software Spend

IT spending in 2010 also generally focused on computer hardware, while 2011 will see an increase in companies buying software, IT consulting and system integration services, Bartels said. Software and services are expected to account for 44 percent of the global IT market, and close to 50 percent in the United States, according to the Forrester analysis.

Since software and services tend to be part of large projects that take months to complete, Forrester’s analysts also forecasted that these two segments will influence strong growth in 2012.

While Forrester remained “bullish” on its forecast, Gartner sounded a note of caution in its revised forecast, released 6 January.

According to Gartner, global IT spending is expected to grow 5.1 percent in 2011 to reach $3.6 trillion (£2.3 trillion). Worldwide IT spending in 2010 was $3.4 trillion (£2.2 trillion), a 5.4 percent increase from 2009, Gartner said.

Gartner’s estimate of total IT spending is higher than Forrester’s because Forrester does not include telecommunications services and equipment in its forecast.

“While the global economic situation is improving, the recovery is slow and hampered by a sluggish growth outlook” in the United States and Western Europe, said Gordon.

The 5.1 percent increase in Gartner’s IT spending forecast translate into a 0.4 percentage drop in spending when factoring in the devaluation of the US dollar, according to Richard Gordon, research vice president at Gartner.

Tablet/Smartphone Impact

“Lest we get over-excited, it’s worth noting that much of this rise is down to currency exchange rate fluctuations that are routinely factored into our forecast,” wrote Gordon in a blog post.

Gartner said the reduction is linked to lower overall PC sales because of the surging popularity of tablets and smartphones.

Gartner reduced estimates for enterprise spending on new PCs for this year, as well. Hardware sales will reach $391.3 billion (£251.4 billion) in 2011, or a 7.5 percent growth, compared to 8.9 percent in 2010. Enterprise software sales, on the other hand, will rise 7.5 percent to $253.7 billion (£163 billion) in 2011, compared to 6.1 percent in 2010, according to Gartner’s analysis.

Like Forrester, Gartner analysts predicted enterprise software sales will accelerate in 2011.

The telecom equipment market is poised for the strongest growth, with worldwide telecom equipment spending expected to grow 9.1 percent in 2011, according to the forecast. The demand in mobile devices “more than compensated” for the downward revisions made for the client computing spending forecast, Gartner said.

Despite “growing concerns” about the ability of “key emerging economies” to sustain high growth rates, investment in IT is “seen increasingly” as an important growth strategy, Gordon said. “We are optimistic about continued healthy spending on IT,” he said.

Overall global IT spending will average 4.8 percent annual growth from 2009 through 2014, Gartner said.

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