Week euro sees Gartner trim IT spending outlook

Industry analyst Gartner has lowered its global IT spending forecast for 2010 on the back of the euro's devaluation against the dollar since the start of the year.

The company's first quarter spending forecast predicted IT spending would total $3.4 trillion in 2010, up 5.3 per cent on the $3.225 trillion predicted earlier. Three months later, however, and the strength of the dollar has forced that figure downwards to $3.35 trillion a 3.9 per cent increase.

"The European sovereign debt crisis is having an impact on the outlook for IT spending," said Gartner research vice president Richard Gordon. "The US dollar has strengthened against the euro during the second quarter of 2010, and this trend will likely continue in the second half of 2010, which will put downward pressure on US-dollar-denominated IT spending growth."

From trading at around $1.45 at the start of the year, and $1.35 three months ago, the euro has since slipped to $1.21 against the dollar today. That, combined with pressure to reduce debt over the next decade, has led Gartner to conclude that recovery is likely to be slower in Europe than it first believed.

"Longer-term, public-sector spending will be curtailed in Europe as governments struggle to bring budget deficits under control during the next five years and to reduce debt during the next 10 years," Gordon said.

"Private-sector economic activity will also likely be hindered because of the direct impact of austerity measures on key government suppliers and the indirect impact caused by the 'ripple effect.' An effective policy response will be critical to stimulate investment in general and in IT in particular."

Some of the strongest growth is expected in the computer hardware sector, which Gartner forecasts will grow 9.1 per cent $363 billion buoyed by the rapid uptake of mobile computing among consumers and the return to normal replacement cycles for businesses, many of whom froze their spending programmes during last year's economic downturn.

Software (3.1 per cent), IT Services (2.9 per cent) and telecoms (3.4 per cent) will also see growth in 2010, but not to nearly the same extent.

"Our latest IT spending forecast reflects the fact that the global economic outlook is stable but vulnerable to shocks in key regions and industries, which means that IT spending decisions are still scrutinised for value," Gordon said.

"CEOs are targeting 2010 as a 'return to growth' year, and to enable growth strategies, CFOs expect increased IT spending. However, CIOs are seeing only marginal increases in budgets and are constrained to essential enterprise IT spending with discretionary spending still on hold."