IT Hits First Year Of Double-Digit Spending Growth In Decade

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IT spending in the fourth quarter was strong, cementing the first year of double-digit growth in the industry in a decade, according to a new report from Raymond James & Associates.

While some of the growth is the result of a rebound of a weaker 2009, it's also ahead of 2008 IT spending by 5 percent to 10 percent, according to the report. Fourth-quarter IT spending growth was 8.4 percent in the fourth quarter, worldwide through IT distributors, and 13.1 percent for the whole year.

And, better news for solution providers: 2011 should again be strong, though the percentage growth might not approach 2010 levels because of a stronger base, wrote Brian Alexander, managing director of equity research, in the report.

"Forecasts for a double-digit increase in corporate operating profits and improving credit trends in 2011 bodes well for tech spending, as these are both leading indicators," Alexander wrote. "While growth will undoubtedly slow from the torrid double-digit pace in 2011 to a more normalized mid-single-digit pace, underlying trends should remain solid."

In North America, IT shipments are estimated to rise 9.3 percent compared to last year and a seasonally strong 10.2 percent compared to the fourth quarter, Alexander wrote.

Storage, networking and PCs were strong product categories in the fourth quarter and a corporate PC refresh cycle might just be beginning, according to Raymond James, as upgrades were deferred in 2010 because of more mission-critical data center projects.

"Data center modernization is an ongoing theme as companies prepare their infrastructure for private and ultimately public cloud. Vendors that appear to have strong momentum include Cisco, VMware and NetApp. Comments on HP and IBM were mixed," Alexander wrote in the report.

Among customer segments, Raymond James termed demand in the enterprise "very robust, while SMB was "improving" and consumer sales were still weak.

"Robust tech spending is being driven by strong corporate profits and an improved credit environment, both of which are leading indicators of IT spending," Alexander wrote. "Adding our fourth-quarter estimate to the year-to-date figures yields a better-than-expected 13.1 percent gain in global IT shipments for 2010."

Resellers serving large accounts grew at a higher rate (18.8 percent) in the fourth quarter compared to the year-ago quarter. Resellers focused on SMB accounts grew 13.3 percent.

"SMB has lagged large account spending for the better part of the past three years. That may be poised to change in 2011 as evidenced by the above average sequential gain, easier comparisons, improving credit, and new tax legislation allowing for accelerated depreciation on IT purchases," Alexander wrote in the report.

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