Two Reports See Silver Lining For IT Industry Sales

While it seems like the IT industry -- the entire economy for that matter -- is all doom and gloom these days, two new reports released Monday indicate that brighter skies are coming.

First, Computer Economics expects IT spending growth to remain flat this year but begin to recover in 2010, according to an assessment of IT spending patterns during the previous two recessions.

The Irvine, Calif.-based firm found that businesses began restraining spending in late 2007, in anticipation of the downturn, but should be investing again next year.

"Over the past two decades, the negative impact of recessions on IT spending has never lasted more than two years," said Frank Scavo, president of Computer Economics, in a statement. "If the pattern of recovery holds true today, we should see a modest increase in IT equipment and software investment in 2010."

The root causes in the current recession are similar to the 1990 recession, Scavo said. However, he cautioned that a return to double-digit growth in IT spending as occurred after the 1990 recession is highly unlikely, as growth then was fueled by Y2K and the Internet boom.

Computer Economics forecasts a 5 percent to 10 percent growth rate for IT equipment and software and a 4 percent to 5 percent increase in IT capital budgets in 2010.

The second report, by Access Markets International (AMI) Partners, indicates that nearly 22 percent of small businesses in India plan to invest in computers for the first time in the next 12 months. For PC makers, that effectively adds more than 500,000 small businesses set to implement technology for the first time.

While current PC-owning businesses are extending the life cycle of those products, there is still much opportunity to sell to new customers, said Dipendra Mitra, analyst at AMI-Partners.

"The non-PC owning businesses hold the key to growth in India. Even if a fraction of the 2.5 million, non-PC owning businesses buy a PC, it will provide a considerable boost to the Indian IT industry," Mitra said in a statement.

Only about one-third of all small businesses in India use a PC, according to AMI. The study found that many companies do not see benefits in the technology. In another recent AMI study, 55 percent of Indian small businesses view PCs as having no relevance to their line of business and nearly a third have not even considered buying a PC.

"However, this attitude is changing as non-PC small businesses realize the benefits of computerization," Mitra said in a statement.

About 90 percent of non-PC-owning small businsses in India said they would prefer to buy from a local computer retail store, with local resellers as the second preferred channel for future PC purchasers.

"Non-PC [small businesses] need considerable hand-holding in the initial stages of PC adoption, in terms of installation and occasional troubleshooting. Those are exactly the strengths of VARs," Mitra said in a statement.