Euro debt crisis to hit global IT spending: Gartner

BANGALORE - The European sovereign debt crisis and a weaker euro will impact worldwide IT spending in 2010, technology research and advisory firm Gartner said in a revised study on trends in the global tech industry.

“The European sovereign debt crisis is having an impact on the outlook for IT spending, which is projected to grow 3.9 percent in 2010 to $3.35 trillion as against $3.23 trillion in a recession-hit 2009,” Gartner research vice president Richard Gordon said in a report released this week.

The devaluation of the euro against the US dollar since January has also forced Gartner to lower its outlook for global IT spending from 5.3 percent it projected in the first quarter (January-March) of this year.

“The dollar has strengthened against the euro during the second quarter (April-June) and the trend is likely to continue in the second half of 2010, putting downward pressure on dollar-denominated IT spending growth,” Gordon noted.

Though an appreciating dollar will dampen the overall growth in software, IT services and telecom this year, the study forecast that spending will turn positive in all the three segments from a de-growth in 2009 when budgets for discretionary spending were frozen.

Spending in software will grow 3.1 percent to $229 billion in 2010 from -2.6 percent or $224 billion in 2009.

Similarly, IT services will grow 2.9 percent to $786 billion from -5.3 percent or $763 billon and telecom 3.4 percent to $1.97 trillion from -3.5 percent or $1.91 trillion.

Spending on computing hardware, however, will witness robust growth of 9.1 percent this year to $364 billion as against a negative growth of 12.4 percent or $334 billion in 2009.

“The computing hardware sector continues to benefit from a healthy PC (personal computer) sector, which accounts for two-thirds of total IT spending. Shipments are expected to remain robust till 2011,” Gordon asserted.

The study also predicted that consumer shipments will be powered by strong mobile PC uptake while commercial shipments will be buoyed by a replacement cycle and migration to Window 7.

While Gartner’s revised forecast reflects a stable global economic outlook, IT spending will be vulnerable to shocks in key regions like Europe and in industrial sectors where decisions will be determined by the return on investments.

“Chief executives (CEOs) hope for a return to growth this year as their financial executives (CFOs) expect increased spending. But information executives (CIOs) see marginal increase in budgets limiting discretionary spending,” Gordon said.

In the European context, the study calls for an effective policy response to stimulate investment in general and in IT particular, as private sector activity will be hindered by the impact of the austerity measures on key government suppliers and the ripple effect.

“Longer term, public sector spending will be curtailed across Europe as governments struggle to trim budget deficits in five years and reduce debt over a decade,” Gordon added.