The US market for technology goods and services will experience a significant slowdown in growth in 2008, to less than 3% from 6% in 2007 according to the latest report by Forrester. Though this lower growth rate reflects the deterioration in the US economic outlook, on a positive note, ‘the US tech market will still grow despite a likely recession in 2008, and it is poised for much stronger growth, assuming that any US recession is shallow and short’, states the report.
The business data driven research report by Forrester - US IT Market Outlook: Q1 2008, is a quarterly IT market outlook. Forrester business data surveys uncover the health of technology budgets, technologies currently deployed, intended future purchases, and processes used in making technology decisions.
Presented by Forrester’s VP and principal analyst Andrew Bartels, the report anticipates the 2008 slowdown in US tech purchases to be followed by stronger 10% growth in 2009 and 2010 on account of downward revisions to its 2008 US forecast. Also dismissing the tech bubble-burst scenario fears, Bartels says: “In 2000-01, a US recession coincided with and was caused by the longest and deepest slide in tech purchases in the past 50 years. A recession will not have that kind of impact this time for two reasons. First, there has been no tech bubble in 2006 to 2007 as there was in 1998 to 2000, so there will not be the depressing effects of a bursting bubble. Second, the US tech sector is poised for a new year cycle of tech innovation growth, just as it was coming out of the 1991 recession, when the networked computing era kicked off.”
He further adds: “By contrast, the US tech sector in 2000 was at the end of that eight-year cycle of tech innovation and growth, and poised to enter an eight-year period of tech digestion. The range of transformative new technologies today is striking from organic IT technologies like server virtualization to new communications systems like unified communications to the flexibility and adaptability of service-oriented architecture.”
The report predicts that while there would be a significant slowing in demand in the first three quarters of 2008, it (demand) should start to pick up in Q4 and accelerate in 2009 as the US moves out of a recession. Bartels advice to all types of IT vendors, therefore, is “Focus on providing IT buyers with opportunities to test drive or pilot new technology so that they will turn to you when 2009 buying decisions start to crystallize later in 2008.”
Computer and communications equipment will drop and then surge. Their new forecast for investment in computer equipment and communications equipment shows 2009 growth of 14% and 9%, respectively, bouncing back from 2008 declines of 1.5% and 0.5% in each case. Software investment will hold strong in 2008 and 2009 before slowing in 2010. However, we expect growth to slow to a still solid 7.5% in 2010 as small and medium-size businesses (SMBs) and more conservative enterprises wait for the SOA suites to mature. IT consulting and systems integration services come back strong after 2008.