IDC lowers global IT spending forecast, citing war and economic woes

Computerworld - Concerns about the war in Iraq, coupled with global economic weakness, have led Framingham, Mass.-based IDC to lower its global IT spending forecast from 3.7% growth this year to 2.3%.
However, the new forecasts, which were published in the IDC 2003 Worldwide Black Book today, also included an upside prediction that a short war in Iraq could result in an economic recovery spurred by a stock market rally, lower oil prices and increased consumer confidence. If that scenario plays out, global IT spending could actually rise by an average of 6% to 7% annually during the next two years, according to Stephen Minton, program director for IDC Worldwide IT Markets.
As part of its research, IDC has found a strong correlation between the direction of corporate profits and their effect on IT spending. "Wild cards" such as the 9/11 attacks in 2001, corporate accounting scandals and the war in Iraq have continued to stall any chances of an economic recovery and improvements in IT spending during the past 18 months, said Minton.
"All of this was really bad timing after the dot-com implosion and the telecom freeze on spending," he said.
In a February report, Cambridge, Mass.-based Forrester Research Inc. predicted that North American IT spending would rise by just 1.9% this year, based on a survey of 877 technology decision-makers. In October, Stamford, Conn.-based Meta Group Inc. predicted that IT spending would shrink by 3% this year.
Meta Group continues to stick by that figure. But because many companies remain in a holding pattern with IT spending, continued economic weakness could lead global IT spending to drop by as much as 5% this year, said Howard Rubin, executive vice president at Meta Group.
For its part, Gartner Inc. has forecast a 4.9% increase in business IT spending for 2003, to $2.1 trillion. IDC places global IT and communications spending at $1.8 trillion for the year.
IDC analysts expect to see further commoditization and price competition in the hardware sector, where they expect global spending to shrink by 3% this year. Meanwhile, global spending on software and services should rise 4.5% and 3.7%, respectively, in 2003. IDC also anticipates that IT spending will rise by 1.5% in the U.S. and 2% in Europe this year, while shrinking by 1.4% in Japan.
Despite continued weakness in technology and IT services purchases, IT spending has actually remained stronger than all other areas of capital expenditures, including commercial real estate and office equipment, said Kevin White, an IDC analyst.
Said White, "Things aren'tgreat, but they could be a lot worse."