Based on newly available economic data, Forrester Research, Inc. (Nasdaq: FORR) is revising downward its outlook for US and global IT purchases in 2008. Forrester now projects that US purchases of IT goods and services will grow 2.8 percent, down from its previous forecast of 4.6 percent. Global purchases of IT goods and services will grow 6 percent, down from the previous preliminary forecast of 9 percent, according to a new Forrester report.
“Our forecast is based on a mild recession in the US economy in the first two to three quarters of 2008,” said Forrester Research Vice President Andrew Bartels. “While it is by no means certain that the US economy will in fact experience a recession, the risks of one are high enough to justify a more conservative outlook for the IT market. The US remains the largest single market for IT goods and services, so it is no surprise that the global market is heavily affected by what happens to the US market.”
Forrester uses several metrics to determine the health and size of the IT market. The data referred to here (and in the Forrester report) comprises IT purchasing: how much equipment, services and consulting companies and governments are buying from technology vendors. It is one of the most important metrics for evaluating the health of tech vendors. The global market for IT purchases is estimated to be $1.7 trillion in 2008. In 2007, global IT buying grew at 12 percent; US IT purchases expanded 6.2 percent.
2008 Global IT Spending By Sector
- Software investment will do better than average. Forrester projects that global purchases of software products will grow by eight percent in 2008, down slightly from 11 percent last year, but still strong.
- Communications equipment investment will grow below the average. This sector will see 3 percent growth in 2008, down from much stronger growth of 12 percent in 2007.
- Computer equipment investment will see a similar slowdown in growth. Forrester foresees the growth in purchases of personal computers, servers, storage devices, and peripheral markets shifting down from 12 percent growth in 2007 to 4 percent this year.
- IT consulting and outsourcing services will expand. While demand for IT consulting and integration services will weaken, demand for IT outsourcing will increase by 9 percent this year.
2008 Global IT Spending By Region
- Europe grows slowly but steadily. In Western and Central Europe, growth will be 5 percent in 2008, following 15 percent growth the previous year, which was due largely to the dollar’s drop against the Euro. Measured in Euros, 2008 growth will be 3 percent.
- Eastern Europe, Middle East, and Africa will see much stronger growth. The total market in this region is about one-sixth the size of the Western and Central European market with just $74 billion in IT purchases of goods and services in 2008. However, in oil and gas producing countries where the economy is stronger — such as Russia, Saudi Arabia, the Gulf states, and Nigeria — IT purchases will grow at 12 percent in 2008, slightly lower than in 2007.
- Asia Pacific grows strongly in 2008, but not as well as 2007. Overall IT purchases in the Asia Pacific market will grow at 9 percent in 2008 (measured in dollars). That impressive growth rate is actually a slowdown from the 15 percent growth rate in 2007.
The US share of global IT purchases continues to contract. In 2003, the US market represented 40 percent of the global market for IT goods and services; by 2008, it will shrink to a 33 percent share. Asia Pacific is the largest region for computer equipment; the US and Asia Pacific each have about one-third of the communications equipment market. Only in software does the US market still dominate, with a 44 percent share of the global software market.
The report, “Global IT 2008 Market Outlook” illustrates 2008 IT spending across 15 countries. The report is based on Forrester’s analysis of data from the Organisation for Economic Co-operation and Development (OECD). Forrester also analyzed the financial reports of 46 large IT vendors.
“Global IT 2008 Market Outlook” is currently available to Forrester RoleView™ clients and can also be purchased directly at www.forrester.com.