The IT industry is exiting its worst year ever, as worldwide IT spending is on pace to decline 5,2%, according to Gartner, Inc. Worldwide corporate IT spending will struggle more with IT spending dropping 6,9%. However, the IT industry will return to growth with 2010 IT spending forecast to total $3,3-trillion, a 3,3% increase from 2009.
While IT spending will increase next year, Gartner cautions IT leaders not to be overly optimistic.
“While the IT industry will return to growth in 2010, the market will not recover to 2008 revenue levels before 2012,” says Peter Sondergaard, senior vice-president at Gartner and global head of research. “2010 is about balancing the focus on cost, risk, and growth. For more than 50% of CIOs, the IT budget will be 0% or less in growth terms. It will only slowly improve in 2011.”
The computing hardware market has struggled more than other segments with worldwide hardware spending forecast to total $317-billion in 2009, a 16,5% decline. In 2010, spending on hardware spending will be flat. Worldwide telecom spending is on pace to decline 4% in 2009 with revenue of nearly $1,9-trillion.
In 2010, telecom spending is forecast to grow 3,2%. Worldwide IT services spending is expected to total $781-billion in 2009, and it is forecast to grow 4,5% in 2010. Worldwide software spending is forecast to decline 2,1% in 2009, and the segment is projected to grow 4,8% in 2010.
On a regional basis, emerging regions will resume strong growth. “By 2012, the accelerated IT spending and culturally different approach to IT in these economies will directly influence product features, service structures, and the overall IT industry. Silicon Valley will not be in the driver’s seat anymore,” says Sondergaard.
From a budget perspective, there are three important items that IT leaders must consider in 2010:
* A shift from capital expenditure to operational expenditure in the IT budget – Concepts such as cloud services will accelerate this shift. IT costs become scaleable and elastic. CIOs need to model the economic impact of IT on the overall financial performance of an organisation. For public companies, they must show how IT improves earnings per share (EPS).
* Impact of the increased age of IT hardware – With delayed purchases of servers, PCs and printers likely to continue into 2010, organisations must start to assess the impact of increased equipment failure rates, and if current financial write-off periods are still appropriate. Approximately 1-million servers have had their replacement delayed by a year. That is 3% of the global installed base. In 2010, it will be at least 2-million. “If replacement cycles do not change, almost 10 per cent of the server installed base will be beyond scheduled replacement be 2011,” says Sondergaard. “That will impact business risk. CFOs need to understand this dynamic, and it’s the responsibility of the CIO to convey this in a way the CFO understands.”
* IT must learn to build compelling business cases – 2010 marks the year in which IT needs to demonstrate true line of sight to business objectives for every investment decision. IT leaders can no longer look at IT as a percentage of revenue. CIOs must benchmark IT according to business impact.
Sondergaard says three additional topics that were important in 2009 will continue to dominate IT leaders’ agendas in 2010. These three topics include:
* Business intelligence – Users will continue to expand their investments in this area with the focus moving from “in here” to “out there”.
* Virtualisation – IT leaders should not just invest in the server and data-centre environment, but in the entire infrastructure. In 2010, users will create the cornerstone for the cloud infrastructure. They will enable the infrastructure to move from owned to shared.
* Social media – Organisations are starting to scale their efforts in this space. The technologies are improving and organisations realise this is not only about digital natives. It’s about all client segments including the most significant: the population in the next ten years, the above-60-year-old generations.