Forrester: 'Prolonged' Recession Could Affect IT Purchases

Forrester Research has outlined an IT spending scenario for a long and deep recession for technology companies. According to this latest Forrester scenario, “A prolonged recession would mean several quarters of declines in IT purchases, not just two or three quarters with little or no growth in late 2008 and first half 2009.” This is the first time Forrester has outlined the possibility that the economic crisis could spark a short-term contraction in IT spending as opposed to a slowdown in growth.

The latest Forrester report offering this scenario - What The Financial Crisis Means To The Tech Market, by Andrew Bartels (VP and principal analyst, Forrester Research), states that on a full year 2009 basis, a sustained recession could lead to annual US IT spending growth of 2-3 percent and global IT spending growth of 3-4 percent. Bartels says, “This is just a scenario as an acute financial crisis has hit not only the US but also countries in Europe and Asia.”

More from Biztech

Future Group - Reliance Retail Deal approved by CCI RBI ban on cryptocurrencies takes effect; prohibition could force investors to tap the black market

“With the financial crisis now spreading around the world, risks have grown that the US and other major countries will experience a longer and deeper recession than we had expected. This scenario will help technology vendors to be prepared, and to mould their strategy, according to the economic environment,” he explains.

He further adds, “The Software and IT services vendors will anyways – with or without the said scenario – start to feel the pain, though sales of these products and services have so far avoided much slowdown in 2008.They will be hit hard in the next three quarters. Still, ‘hit hard’ is relative — vendors in these categories will have on average 3 percent to 5 percent growth instead of the 9 percent to 12 percent growth they’ve seen earlier in 2008.”

Stating that the rules for technology vendors’ success have changed, Bartels recommends, especially to the US-based vendors, to refocus on the US market as it (US market) is likely to recover from a global slowdown sooner and stronger than other markets.