Gartner: IT spending drop-off worse than after dot.com bust

Global IT spending is expected to decline nearly 4% in 2009 over the previous year as industry watchers confirm the current recession will see more losses than the dot-com bust in 2001, Gartner reports.

"The IT market slowdown will be worse than 2001, that downturn was tech-related. Today there is a general slowdown in demand for products and services across the board and IT spending is not immune," said Richard Gordon, research vice president of global forecasting at Gartner, Tuesday on a conference call announcing the spending forecast.

Gartner reported that global IT spending will reach about US$3.2 trillion in 2009, a 3.8% decline in growth from the $3.3 trillion spent in 2008 -- which marked a 6.1% growth over 2007. The research firm adjusted its spending forecast downward across all segments, attributing the cutback in spending to the economic recession. IT spending in 2001 saw a 2.1% decline, according to Gartner.

"The impact on IT spending is becoming clearer. As global economies continue to decline sharply, IT departments are trimming budgets and consumers are cutting back on discretionary spending," Gordon said. "The first quarter of 2009 provided confirmation that key markets and vendors have entered a recession."

Hardware in particular will see a nearly 15% decline as fewer companies invest in 2009 and are expected to spend $324.3 billion, compared with $381 billion spent on hardware in 2008. Software spending will be about flat at $222.6 billion. IT services will decline 1.7% with total spending reaching about $796 billion. As for the telecom sector, Gartner expects to see a nearly 3% decline in spending with total investments reaching $1.9 trillion.

Despite the promise of government stimulus packages in the long term, Gordon explained, they won't be able to offset the "bleak near-term outlook." Global financial markets have yet to stabilize, and that means IT buyers aren't confident on where to invest their budget dollars.

"Economic conditions have continued to erode business confidence in all regions. There is a continued general sense of uncertainty in the market and a lack of clarity of actual amount of toxic debt out there," Gordon said. "IT organizations will look for ways to shift spending from capital expenditures to operational efficiencies."

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