The Hindu Business Line : ‘US market for tech goods, services to decline in 2008’

On a downtrend
The main reason for projecting a slowdown is the assumption the US economy will slip into a recession in the first, second and perhaps third quarter.
Nominal GDP growth to dip to less than 2 per cent growth rates in the first and second quarter.

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Bangalore, April6 Forrester Research, in its latest quarterly IT market outlook, said the US market for technology goods and services will see a significant slowdown in growth in 2008 to less than 3 per cent, compared with 6 per cent in 2007. But it expects IT purchases to rebound 10 per cent in 2009 and 9.8 per cent in 2010.

Forrester’s new forecasts for investments in computer and communications equipment shows a growth of 14 per cent and 9 per cent in 2009, bouncing back from 2008 declines of 1.5 per cent and 0.5 per cent. It said just as CIOs defer capital investment in such equipment during a slowdown, their first action in a recovery are to step up the investments to make up for lost ground.

Software investment, which will come through the 2008 slump in good shape with 8 per cent growth, will strengthen in 2009 to 11 per cent on the back of strong demand by early adopters for new service-oriented architecture (SOA) application suites from Oracle and SAP, it said. However, it expects growth to slow to a still solid 7.5 per cent in 2010 as small and medium-size businesses and more conservative enterprises wait for the SOA suites to mature.

Forrester expects growth in purchases of IT consulting and systems integration services to fall to 2.2 per cent in 2008. But pent-up demand for help with building SOAs and implementing new SOA-based applications from application vendors will push growth up to more than 9 per cent in 2009, it said.

Forrester expects IT outsourcing growth to hold steady in 2008, and then slip in 2009 and 2010. IT outsourcing will escape the slowdown in 2008, as companies look at outsourcing to help cut IT costs. However, growth would slow to 4.5 per cent in 2009 and 2010, as companies focus more on getting their hands on new, emerging technologies rather than outsourcing these technologies, Forrester said.

Forrester said the main reason for projecting a slowdown is the assumption the US economy will slip into a recession in the first, second and perhaps third quarter. It said it expects nominal GDP growth (which is the key driver of IT investment) to dip to less than 2 per cent growth rates in the first and second quarter.

But Forrester expects the worst of the downturn to be over by mid-year, with stimulus from recently enacted federal tax rebates and lower interest rates preventing further declines in the economy. As a result, it expects nominal GDP growth to recover to a 4 per cent growth rate by the fourth quarter.

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