Report: IT 'Tech Boom' Will Revive Next Quarter

• By Herb Torrens
• 10/08/09

The global IT market will see an upturn, starting next quarter, according to a report released last week by Forrester Research.

Such optimism in the face of the current economic downturn may seem a bit unwarranted at this point. However, Andrew Bartels, the report's author and analyst at Forrester, pointed to recent revisions on IT investment data by the United States government. The data now indicate that 2008 was a better year than previously indicated.

The revised data shows that a "tech-boom" actually occurred in the IT market, beginning in 2007, according to Bartels in the report, "US and Global IT Outlook: Q3 2009."

"If there were any surprises in this report, it was that 2008 was better than what we had projected and 2009 was worse," Bartels explained in a telephone interview. "This makes 2010 look a little better than we expected, and it marks the return of a tech boom that started in 2007."

The boom was snuffed out by a deeper-than-expected recession and a financial crisis that put capital investment in reverse. Bartels added that a general dissatisfaction with Microsoft's Windows Vista operating system had many companies putting off buying new PCs.

"The whole PC category had been going into a slump both from the release of Vista and because of emerging technologies such as netbooks and smart phones," Bartels said. "We see the release of Windows 7 as playing a factor in new capital investment in PCs, especially for companies that have not refreshed their PCs in four or five years."

He added that the PC category, which includes desktops and laptops, is a mature space. That means that even though PC sales may spike in 2010, the category as a whole will only grow four percent to five percent annually in the coming years.

"The market for classic PCs is eroding and the laptop market is fragmenting because of the trend towards netbooks and smart phones," Bartels said. "Neither is an endangered species yet, but the category is shrinking."

The report speculates that the bottom of the IT tech market happened in the first and second quarters of this year. Analysis of that market is based on the sales of computers and peripheral equipment, communications equipment, software, IT consulting services, and IT outsourcing services.

Looking ahead, the report predicts that the use of IT consulting services will increase by 11.7 percent in 2010. In addition, software purchases will be up by 9.3 percent, computer equipment sales will increase by 8.3 percent and communications equipment sales will show a bump at 3.6 percent. Outsourcing will rise by 4.5 percent in 2010, the report predicts.

"We see licensed software as a strong category that was hit hard by the recession, especially at the enterprise level," Bartels said. "With the return of capital investment we see it making a strong comeback."

Microsoft will ride the rising tide of increased license sales and new application development, Bartels said. He said he doubts that many enterprises will make a major switch to cloud services and virtualized machines as opposed to owning and operating their own IT footprint.

"At Forrester, we recognize that cloud computing is a trend, but it is a somewhat vaporous concept that is sucking up a lot of existing platforms such as software-as-a-service and redefining it as cloud," Bartels said. "At the end of the day, most companies, and especially in the enterprise, still want to own, operate and control their IT environment."

Bartels predicted that enterprise organizations will be the first to reinvest in IT and lead the revival of the tech boom.