IBM CDR CAD Hedged (NEO:IBM)
Historical Stock Chart

From Jun 2019 to Jun 2024

This year marks the worst ever decline in global IT spending, although technology companies can at least look to a rebound from this point, according to Peter Sondergaard, an analyst for research firm Gartner.

Global IT spending is expected to fall 5.2% from a year ago to $3.3 trillion. Because of the size of the market, the decrease in spending has been felt heavily in the tech industry.

"It's such a profound element of the economy," Sondergaard told Dow Jones Newswires on Monday.

Gartner released its IT spending projections as part of its IT conference in Orlando, which began on Sunday.

Last year, Garnter had anticipated a 4% decline, but things quickly appeared to get worse faster. But IT spending is past the bottom, Sondergaard said, primarily as a result of the infusion of stimulus money around the world.

As a result, Gartner expects healthcare, utilities and government IT spending to drive the recovery. While spending growth is expected next year, spending won't return to 2008 levels until 2012, he said.

It's not just happening in the U.S., either. IT is recovering rapidly in China thanks to its own stimulus program, Sondergaard said. Spending in emerging markets is also expected to prop the industry next year.

Heading into next year, there continue to be laggards. The manufacturing, transportation, retail and telecom industries aren't expected to see a significant rebound next year, he said. The financial services industry is expected to return to spending toward the end of the first half.

Within individual businesses, companies are spending in areas such as software as a service, or applications delivered over the Internet, as well as business analytics and other information services. Salesforce.com Inc. (CRM) is expected to be a beneficiary.

There continues to be a pullback in hardware spending, as well as for consulting services, as illustrated by International Business Machines Corp.'s (IBM) recent third-quarter report. Business software makers such as SAP AG (SAP) and Oracle Corp. (ORCL) are also likely to see slower spending, as companies ease off on upgrading existing programs, he said.

On the consumer side, hardware sales could see a pick up thanks to the launch of Microsoft Corp.'s (MSFT) Windows 7 operating system, expected on Thursday. But companies will be slower to adopt the operating system, and corporate upgrades aren't expected to begin until the end of the second quarter, Sondergaard said.

Also on the equipment side, the lack of spending on servers may end up biting the tech industry down the line. Sondergaard said that by 2011, 10% of the servers in use will be well past their replacement date, which could lead to network problems.

"It's slow to impact, but it's also slow to fix," he said.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com