Gartner Perspecitve: IT Spending 2010

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Gartner delivers that insight through unique perspectives on IT spending, including peer benchmarks, spending forecasts and budgeting constructs.

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<ul><li> 1. GarTner PerSPecTIve: IT Spending </li> <li> 2. 2010 may be the most important year of your career. 2008 2009 witnessed the most severe economic recession in generations, and the IT industry suffered an even greater decline than it did during 2001, following the dot-com bubble. Yet all recessions come to an end, and this one will, too. It is nowas the recession gives way to growththat there is great opportunity to plan for that growth and enable your organization to take advantage of a recovering economy. Leading the IT organization in 2010 requires a clear vision for melding technology, business process and financial management into a cohesive view of IT investments and priorities. </li> <li> 3. IT Spending Overview The basis for such vision is insight into which industries, countries and IT priorities will grow fastest, first, giving you the ability to anticipate and innovate rather than react and follow. Gartner delivers that insight through unique perspectives on IT spending, including peer benchmarks, spending forecasts and budgeting constructs. Gartner has the most extensive IT benchmarking database available, enabling clients to assess their IT spending relative to their peer organizations based on size, industry and geography. Gartner also surveys HR and finance professionals to gain their unique perspective on IT. In addition, daily interactions with technology and service providers and investors provide another dimension to our analysis of IT spending. The 3,700 CIOs and senior IT executive who are members of Gartner Executive Programs also provide invaluable insight into the leading practitioners of information technology, further rounding out the nuanced viewpoint only Gartner offers. Gartner analysts are world-renowned experts in their fields, leveraging all of these perspectives to create holistic forecasts of the IT industry. It is this uniquely broad set of inputs, combined with analyst expertise and daily interactions with clients, that enables Gartner to decisively forecast the IT industry across industries, geographies and enterprise size. Simply stated, Gartner delivers the worlds most comprehensive, accurate perspective on IT spending. The Gartner Perspective: IT Spending booklet provides an overview of Gartner research on IT spending and functions as a reference guide to top-level statistics and IT spending analysis. It provides a glimpse into the powerful insight Gartner can provide as you navigate through what may be the most important year of your career. Barbara Gomolski Managing Vice President Gartner Research </li> <li> 4. Table of Contents 3 Worldwide IT Spending Forecast 4 Worldwide Computing Hardware Outlook 6 Worldwide Software Outlook 8 Worldwide Telecommunications Outlook 10 Worldwide IT Services Outlook 12 Worldwide IT Spending by Region 13 IT Spending Trends by Vertical Industry 16 IT Metrics: IT Staffing Levels for 2010 18 CIO Agenda 2010 </li> <li> 5. Worldwide IT Spending Forecast Worldwide IT Spending Forecast Richard Gordon, Vice President, Gartner Research The global economic downturn has continued to weigh on the ability and desire of businesses and consumers to make IT purchases. However, we assume the economy will recover, beginning towards the end of 2009 and tentatively at first. While initial growth in IT spending in 2010 and 2011 may come as the result, directly or indirectly, of the various government stimulus packages announced around the world in recent months, there will be a return to more sustained growth in IT spending in 2012 and 2013 as the economic recovery unfolds. IT budget cuts may have slowed market growth in the short term but, even in the toughest of business environments, enterprises must preserve short-term spending on critical business operations and long-term technology investments. IT vendors should be sensitive to the challenges faced by their customers and plan pricing strategies accordingly. The global economic downturn may be easing, but IT budgets are still being cut and consumers will need more persuading before they feel confident enough to spend more. Worldwide IT spending is forecast to total $3.2 trillion in 2009, a 5.2 percent decrease from 2008 spending of $3.4 trillion (see Table 1). Worldwide IT spending is expected to return to growth in 2010 as revenue is projected to reach $3.3 billion, a 3.3 percent increase from 2009. TaBle 1 Worldwide end-User Spending on IT (Billions of U.S. Dollars) 007 008 009 010 Total Market 3,181 3,372 3,198 3,304 Annual Growth (%) 6.0 -5.2 3.3 Source: Gartner (September 2009) </li> <li> 6. Worldwide IT Spending Forecast In addition, during the next two years IT vendors should: Reassess rapidly changing customer needs and opportunities. For example, social networks are impacting the way in which vendors should communicate with customers. Marketing messages must be managed and controlled more closely. Rebalance priorities between customer acquisition and retention. As the sales environment has become more challenging, business will have focused much harder on retaining existing customers. Provide realistic business return on investment statistics, benchmarks and proofs of concept. For example, ensure that products and services deliver tangible and demonstrable business benefits. Revaluate and refine partnership programs, relationships and strategies. For example, quantify and justify assumptions of the opportunity available to partners, and prepare for new market entry with partners that can provide regional, vertical market and application integration skills. Worldwide Computing Hardware Outlook Jon Hardcastle, Director, Gartner Research Hardware is the easiest segment of IT spend to cut from budgets as there is no ongoing spend to support. Hardware spend is also heavily impacted by the poor access to credit, both for individuals and companies. Hardware will therefore see the steepest decline of all segments during 2009. The weakest segments are PCs and servers. These segments are impacted by delayed replacement activity and very little new investment. </li> <li> 7. Worldwide Computing Hardware Outlook Worldwide hardware spending is on pace to decline 16.5 percent in 2009 as revenue totals $317 billion (see Table 2). In 2010, hardware spending will be flat with spending totaling $317 billion. TaBle 2 Worldwide end-User Spending on Computing Hardware (Billions of U.S. Dollars) 007 008 009 010 Total Market 370 380 317 317 Annual Growth (%) 2.5 -16.5 0.0 Source: Gartner (September 2009) The dollars rise has also had a very strong effect on the hardware market. As the dollar has risen, like-for-like local revenues have led to lower U.S. dollar revenues. Most hardware pricing follows the dollar, so a rising dollar will also lead to rising local prices. Rising prices in such a poor economic environment will lead to falling sales. Hardware vendors look to offset this by lowering configurations; however, this leads to erosion of U.S. dollar average selling prices (ASPs) and lower U.S. dollar revenues. Users, especially professional users, have increased average hardware lifetimes in response to the ongoing economic slowdown. The most prominent segments to see longer life cycles are professional PC desktops, copiers and multifunction products, and x86-based servers. We expect longer lifetimes to delay roughly 40 million desktop PC replacements and 7 million mobile PC replacements in 2009. </li> <li> 8. Worldwide Hardware and Systems Outlook Companies are reviewing their deployment strategies and making decisions such as permanently lengthening life cycles, deploying virtualization, consolidating devices, migrating from higher-cost platforms or cutting non-core infrastructure. Meanwhile, while new strategies are developed, there will be further buyer inertia and sales cycles will lengthen. We expect 2010 spending to be at a similar level to 2009. Although we will see an increase in replacement activity, this will take place in a highly cost-constrained environment. Lower configured systems, lower ASPs, virtualization and consolidation will mean that the increase in replacement demand will not necessarily be reflected in increased levels of spend. Worldwide Software Outlook Joanne Correia, Managing Vice President, Gartner Research Cost optimization will benefit alternative software acquisition models as organizations will look for ways to shift spending from capital expenditures to operating expenditures. Because of this, vendors offering software as a service (SaaS), IT asset management, virtualization capabilities and a good open- source strategy will benefit. However, the still-small portion of spending coming from these technology areas does not have the ability to improve the gloomy outlook for the overall software market. </li> <li> 9. Worldwide Software Outlook Worldwide software spending in 2009 is on pace to total $221 billiona 2.1 percent decline from 2008 spending of $225 billion (see Table 3). Software spending is projected to return to growth in 2010, with revenue reaching $231 billion, a 4.8 percent increase from 2009. TaBle 3 Worldwide enterprise Spending (Billions of U.S. Dollars) 007 008 009 010 Total Market 209 225 221 231 Annual Growth (%) 7.9 -2.1 4.8 Source: Gartner (September 2009) Hardware projects continue to be stalled for PCs, servers and storage, further pushing down the new sales of infrastructure software that are dragged by hardware sales. Also, new sales of enterprise application software in the manufacturing and financial sectors have completely stalled as these vertical sectors sort out their long-term viability. Nevertheless, survey research indicates that organizations are looking to the long term by streamlining their IT portfolios and considering new products that help them optimize their IT infrastructure, resulting in smaller but more-strategic purchases. As a consequence, we expect pent-up demand for infrastructural, strategic and enterprisewide deployments to increase, and to materialize at some point when economic recovery begins. Overall enterprise software sales for 2010 look positive, but the drag from the downturn is slowing down the pace of recovery of the annual growth rate (AGR) through the forecast period. 7 </li> <li> 10. Worldwide Telecommunications Outlook Worldwide Telecommunications Outlook Peter Kjeldsen, Director, Gartner Research Gartner expects the telecommunications market to decline nearly $79 billion, or -4 percent in 2009. The market is forecast to grow 3.2 percent in 2010, taking the total market to $1.9 trillion (see Table 4). TaBle 4 Worldwide end-User Spending on Telecommunications (Billions of U.S. Dollars) 007 008 009 010 Total Market 1,854 1,958 1,879 1,940 Annual Growth (%) 5.6 -4.0 3.2 Source: Gartner (September 2009) Consumers have replaced their mobile handsets less often, and those who have replaced them have spent less money doing so as more aggressively priced devices have reached the market. Smartphones is the fastest-growing segment and is expected to represent 15 percent of overall mobile device sales. Consumer spending on both mobile and fixed services remains fairly resilient to the global economic downturn. However, average revenue per connection will continue to trend down on a global basis in the midterm despite operator attempts to use mobile data to offset price reductions in voice. The enterprise network services segment is being hit by the tight access to capital that will remain in many countries through mid-2010. The recession is lengthening sales cycles, and providers are being forced to offer deeper discounts in the short term to win business. 8 </li> <li> 11. Worldwide Telecommunications Outlook Overall spending in the enterprise network equipment market will be driven by changes in gross domestic product (GDP) and employment through 2011, particularly in mature markets. Spending on areas that promise cost savings, such as WAN optimization and Secure Sockets Layer (SSL) virtual private networks (VPNs), will be less influenced by changes in GDP and employment levels. Within the enterprise communications applications segment, telephony is a mature market that typically grows in line with overall economic growth. Revenue from contact center infrastructure will recover somewhat but will lag overall economic growth until organizations re-staff call centers up to the capacity of their technology deployments. There will be a shift from hardware-based desk phones to shipments of licenses for software clients for PCs, laptops and smartphones. The carrier network infrastructure market is suffering a late cyclical impact from the financial crisis, with negative growth in 2009 and 2010. However, the long-term fundamentals are intact and will drive a moderate rebound of the market from 2011 to 2013. Emerging markets will continue to gain importance throughout the forecast period. New investments in telecom operations and management systems (TOMS) will be primarily driven by business goals of cost savings, revenue generation, as well as improvements in customer experience and churn reduction. In the developed markets, complex TOMS transformation, modernization programs and adoption of new technologies and services will drive growth. In emerging markets, rapid subscri...</li></ul>

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