European debt crisis hits global IT spend forecast

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Thanks to the US dollar getting stronger against the Euro as the European debt crisis takes hold, and shows no signs of weakening for the remainder of the year, so the outlook for IT spending growth looks dim. So dim, in fact, that Gartner analysts have cut back the worldwide IT spending growth forecast for 2010 from 5.3 percent to just 3.9 percent.

According to Gartner, worldwide IT spending is now forecast to total $3.350 trillion through 2010, which equates to an increase of 3.9 percent over the 2009 spending total of $3.225 trillion. In the first quarter of this year Gartner was forecasting worldwide IT spending to growth of 5.3 percent based on the devaluation of the Euro versus the US dollar since the start of the year.

Worldwide, the computing hardware spend is being forecast to reach $363 billion in 2010 which is up 9.1 percent from 2009 spending, benefitting from a continuing healthy PC sector accounting for some two-thirds of total spending in this area. Gartner expects PC shipments to remain robust throughout 2010 and 2011 with consumer shipments continuing to be powered by a strong mobile PC uptake, and professional shipments buoyed by a new replacement cycle with migration to Windows 7.

Richard Gordon, research vice president at Gartner, now says that the continuing strength of the dollar will "likely continue in the second half of 2010" and warns that this will "put downward pressure on US-dollar-denominated IT spending growth." Longer term. Gordon expects pubic sector spending to be curtailed across Europe as governments continue to struggle bringing their budget deficits under control during the five years to come and, indeed, to reduce that debt during the next decade. "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" Gordon says, adding "an effective policy response will be critical to stimulate investment in general and in IT in particular."

According to Gordon the latest IT spending forecast reflects the fact that while the global economic outlook is stable it remains vulnerable to shocks in key regions and industries. "CEOs are targeting 2010 as a return to growth year, and to enable growth strategies, CFOs expect increased IT spending" Gordon says, however he warns that "CIOs are seeing only marginal increases in budgets and are constrained to essential enterprise IT spending with discretionary spending still on hold."