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Gartner Sees Slight Rebound In 2010 IT Spending, Offers Budgeting Advice

Michele Masterson

"While the IT industry will return to growth in 2010, the market will not recover to 2008 revenue levels before 2012," said Peter Sondergaard, Gartner senior vice president and global head of research, in a statement. "2010 is about balancing the focus on cost, risk and growth. For more than 50 percent of CIOs, the IT budget will be zero percent or less in growth terms. It will only slowly improve in 2011."

Still, even a forecast of flat to slight growth is music to the ears of those in technology as the industry winds down what Gartner said is the sector's worst year ever. According to the company's forecast, worldwide IT spending is on pace to see a 5.2 percent decline in 2009. Global enterprise spending will take even more of a hit, and is predicted to fall 6.9 percent this year, the analysts said.

Of all tech segments, the hardware market has been hit the hardest, expected to suffer a 16.5 percent decline in global IT spending from 2008, totaling $317 billion in 2009. Although global hardware spending won't see any gains in 2010, it is not expected to experience losses, as Gartner sees flat spending in the year.

While not suffering as much, worldwide telecom spending is expected to fall 4 percent in 2009 from 2008, with revenue of almost $1.9 trillion. However, Gartner sees spending to climb 3.2 percent in 2010.

Gartner sees worldwide IT services spending totaling $781 billion in 2009, and predicts it will grow 4.5 percent in 2010.

The 2009 outlook in global software spending is a loss of 2.1 percent from the year before, but sunnier days are ahead, as the area is expected to climb 4.8 percent in 2010.

In his research, Sondergaard also provided some advice for IT leaders who are making budget plans in 2010. One area to look at, he said, was making a shift from capital expenditure to operational expenditure in the IT budget.

"Concepts such as cloud services will accelerate this shift," Sondergaard said. "IT costs become scalable and elastic. CIOs need to model the economic impact of IT on the overall financial performance of an organization. For public companies, they must show how IT improves earnings per share."

Another issue Sondergaard addressed has been one that vendors and resellers have stored a lot of hope in: replacing aging hardware.

Sondergaard believes delays in replacing PCs, servers and printers will continue into 2010, but warns that decision must begin by assessing the impact of increased equipment failure rates and if their financial write-off periods are still appropriate. According to his research, Sondergaard said roughly 1 million servers have had their replacement delayed by a year, which is 3 percent of the global installed base. In 2010, it will be at least 2 million.

"If replacement cycles do not change, almost 10 percent of the server installed base will be beyond scheduled replacement by 2011," Sondergaard said. "That will impact enterprise risk. CFOs need to understand this dynamic, and it's the responsibility of the CIO to convey this in a way the CFO understands."

Finally, Sondergaard said that IT has to learn how to build compelling business cases.

"2010 marks the year in which IT needs to demonstrate true line of sight to business objectives for every investment decision," he said. "IT leaders can no longer look at IT as a percentage of revenue. CIOs must benchmark IT according to business impact.

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