US technology firms’ budgets to rebound in December quarter

US technology firms’ budgets to rebound in December quarter

Mumbai: Technology budgets at US firms are set for a rebound from the October-December quarter as the world’s largest economy recovers from the downturn, researcher Forrester Inc. said in a report released on Thursday.

The US contributes nearly 60% of the revenue for Indian software companies, but its firms had curbed spending on information technology (IT), among other things, to lower costs and survive the downturn.

Their overall technology budgets will likely decline to $526 billion (Rs25 trillion) by the end of 2009, from $580 billion the previous year, but pick up in 2010 to $567 billion, Forrester said in the report.

“The US tech market will start to recover from the downturn in Q4 2009, with the global tech market improving in 2010," Forrester analyst Andrew H. Bartels said in the report.

Senior executives at India’s top technology firms such as Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro Ltd too have been signalling expected growth in business.

Forrester’s prediction is based on data on IT investment and economic growth reported by the US department of commerce, in addition to data it collected from leading technology firms.

Technology budgets in Central and Western Europe are also expected to return to growth beginning in the last quarter of 2009, Forrester said. In 2010, IT budgets in these regions will increase by 7.4%, it added.

The overall global technology budget is expected to decline to $1.47 trillion in 2009 from $1.66 trillion in 2008 and recover to $1.55 trillion in 2010, Forrester said in its report.

At $345 billion, outsourced IT services, IT consulting services and software products have constituted the major chunk of the technology budgets for US firms so far in 2009. The rest of the spending was on communication hardware, computer systems and related peripherals.

The services budget, Forrester says, will go up to $376 billion in 2010.

“Looking ahead to 2010, we continue to expect a strong recovery in the US IT market, with 7.7% growth, led by IT consulting services (up 11.4%), software (up 9.3%), and computer equipment (up 8.3%)," Bartels said. “Communications equipment will be slower to come back, but will still increase by 3.6%. IT outsourcing will rise by 4.5%."

Firms are also likely to boost spending ahead of the holiday season in the US, when consumers typically buy more technology products.

“Despite the deeper-than-expected cuts in tech purchases in the first half of 2009, the stage is set for a revival of the US tech market starting in Q4 2009 and gaining strength in 2010. So, now is the time for tech vendors to step up sales and marketing, and get ready to take advantage of the rebound in tech buying," Bartels said.

India’s second largest IT services exporter, Infosys, will announce its second quarter financial results on Friday. According to a Mint poll of 11 brokerages, the top three Indian IT exporters are expected to report a revenue growth of between 2% and 4% over the first quarter.

On Thursday, the Bombay Stock Exchange’s (BSE) sectoral index, BSE IT, fell 1.86% on concerns over the rupee’s strengthening against the dollar. BSE’s sensitive index, or Sensex, rose by 0.22% to 16,843.54 points.