Our current forecast that US and global IT purchases will experience slow growth from Q4 2008 to Q2 2009 but no decline assumes that the US economy will have two to three quarters of negative real growth ending in Q2 2009 and that the major European economies and Japan will follow a similar pattern with a quarter lag. Given the strains in financial markets and the global nature of the slowdown, the most likely alternative economic prospect is for a longer and deeper recession that lasts into 2010. In that scenario, US IT market growth in 2009 would slip to 2% to 3% in annual growth, with several quarters of declining purchases, instead of our current projection of 6% for 2009. Global IT market growth would have a similar deceleration, moving from 7% to 8% that we currently project for 2009, to much slower growth of 3% to 4%.
Of course, any cuts to IT budgets be they the increase or not, result in reduced spending by IT. CE asked what their respondents were cutting to save money and found that 35% of IT organizations took actions to reduce expenses from August to October, as the economy declined, compared to 11% that increased their IT spending plans during the three-month period.
When asked what steps they were taking to restrain spending over the last three months, the most frequent actions were cutting travel (55%), delaying the start of major projects (44%), and not filling open positions (40%). Sixteen percent of the respondents said they had taken no action to cut IT spending in response to economic conditions.
"At this point, most organizations appear to be taking only the quickest and easiest actions," Scavo said in a written statement. "Most are not yet making the deeper and more painful reductions, such as cutting staff or outright cancellation of major projects."
Other cost-cutting actions included:
▫ Deferring equipment upgrades (35%)
▫ Cutting contractors and temps (33%)
▫ Cutting back on IT training (26%)
▫ Renegotiating vendor contracts (26%)
▫ Cutting meals/entertainment (24%)
▫ Cutting planned pay increases (17%)
▫ Cutting IT staff (17%)
▫ Canceling major projects (16%)
▫ Investigating outsourcing/offshoring (15%)
▫ Stretching out vendor payments (11%)
▫ Cutting IT staff hours (4%)
▫ Canceling software maintenance (3%) and
▫ Canceling hardware maintenance (3%).
So, while things are certainly not rosy, they could, and may indeed get a lot worse. But, if the current forecasts hold, IT will not be in for as bumpy a ride as other sectors the economy.