Gartner Says IT Spending Worse Than After Dot-Com Bust - InformationWeek

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Gartner Says IT Spending Worse Than After Dot-Com Bust

Companies worldwide will spend 3.8% less on IT in 2009, significantly lower than the analyst firm's "worst-case" October forecast of a 2.3% increase.

With the global economy tanking, IT spending this year will drop to a level much worse than what was seen following the dot-com bust in 2001, a market research firm said Tuesday.

Companies worldwide will spend 3.8% less on IT than in 2008, or $3.2 trillion compared with nearly $3.4 trillion, Gartner said. When the Internet investment bubble burst eight years ago, IT spending fell by 2.1%.

Gartner has been lowering its IT spending estimates for months. Last October, the research firm said its "worst-case scenario" called for a 2.3% increase in IT spending for 2009. By February, Gartner had lowered its prediction to an increase of 0.5%.

The latest numbers reflect another dramatic across-the-board lowering of Gartner's forecast for the four IT segments: computing hardware, software, IT services, and telecommunications. A major contributor to the decline is the drop in the global gross domestic product, or GDP, which is expected to fall by 1.2% this year after expanding by 2.3% last year.

With the exception of software, which will be nearly flat, all the other segments will see declines, led by computing hardware, which will fall 14.9% to $324.3 billion, Gartner said.

The drop in computer spending is caused by a slowdown in new sales in emerging markets and replacement sales in mature markets among businesses and consumers. In addition, virtualization, which enables companies to consolidate more business applications on a single server, also is expected to contribute to the sales drop.

As a result, virtualization software sales are expected to be a bright spot in the gloomy forecast. At $4 billion in annual sales, the virtualization market is a sliver of overall IT spending. Nevertheless, companies are expected to spend 33% more on the technology than last year. Sales through 2013 are expected to increase at a compound annual growth rate of about 30%, Gartner said.

"People want to optimize their cost and virtualization is a great way to squeeze out more value in what you already have in house," Garner analyst Fabrizio Biscotti said during a Web briefing for clients and media.

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