Company spending on technology is shaping up to see modest growth this year but won’t return to prerecession levels anytime soon.
Worldwide spending on technology products and services is expected to grow 3% this year, according to a recent forecast from International Data Corp., a Framingham, Mass.-based market research group.
In the U.S., spending is forecast to grow by a bit less than 3%, slower than historic levels.
“The gradual economic recovery will enable many U.S. organizations to relieve some of the pent-up demand for system and network upgrades following last year’s spending cuts, but spending will continue to be cautious,” said Stephen Minton, vice president of worldwide IT markets and strategies at IDC. “Spending on information technologies will continue to feel the effects of the global recession throughout 2010.”
Worldwide, spending on technology is expected to total $1.5 trillion this year, according to IDC. That’s up from a 5% decline in spending in 2009 and roughly the same as 2008.
New Horizons
The pickup in technology spending began to show early this year, according to Kevin Landry, chief executive of Anaheim-based New Horizons Computer Learning Centers of Southern California.
New Horizons’ parent, KML Enterprises Inc., operates franchises that offer software training to workers and technology professionals.
“We saw during the downturn that at a lot of the bigger clients, the first thing they cut was their internal training as they were reducing headcount,” Landry said.
New Horizons is starting to see those companies go back and train recent hires as well as the existing employees.
“In the fourth quarter we really started to see things pick up and that continued into 2010,” Landry said. “Three out of our last five months have been our top months ever. We are seeing people spend money now on IT training.”
New Horizons is privately held and doesn’t disclose financials.
Some of its local customers include the county of Orange, Santa Ana’s First American Corp., UCI Medical Center in Orange and Toshiba Corp., which has big operations in Irvine.
Small and midsize businesses are expected to be the slowest to recover from the downturn and likely will be the last to boost their technology spending, according to IDC’s research.
“The downturn had a devastating impact on small and medium businesses worldwide,” said Ray Boggs, vice president of small and medium business research for IDC. “Small businesses will not follow the past pattern and return to prerecession spending levels. They will remain cautious with their IT spending over the next several years.”
Worldwide tech spending by small and midsized businesses isn’t expected to return to 2008 levels until at least 2011, IDC’s report showed.
Overall, technology spending by these businesses is expected to climb 5% to 6% from this year through 2014.
“This is considerably lower than previously forecast,” Boggs said.
There are a few bright spots in technology spending as companies that held off on purchases last year now are being forced to upgrade their computers and data storage to keep up with new files.
“Storage spending is still going strong,” said Kaushik Roy, data center analyst at Wedbush Securities LLC in San Francisco. “Over the last two years capacity was increasing, storage needs were increasing but the hardware acquisition was on hold. This year, storage in general should grow a couple percent faster than the overall IT spending growth rate.”
Corporate spending on computer products is set to remain below its 2008 levels through 2014, according to data from Stamford, Conn.-based market tracker Gartner Inc.
“Spending on storage will enjoy the fastest growth as the volume of enterprise data that needs to be stored continues to increase,” said Richard Gordon, vice president of research at Gartner.
Sales of Computers
But the biggest growth “will be concentrated on lower-end servers,” he said.
That growth in computers will be driven by consumers replacing laptops and companies upgrading desktop computers with the latest round of Microsoft Corp.’s business software.
Global computer products spending is seen as reaching $353 billion this year, up nearly 6% from 2009, according to Gartner.
Spending on computer gear took the biggest hit during the downturn. Last year’s sales were off 13% from 2008.
“Computing hardware suffered the steepest spending decline of the major category segments in 2009,” said George Shiffler, research director at Gartner. “However, it’s now forecast to enjoy the strongest rebound in 2010.”
That’s good news for local computer products companies (see list, page 18), which have seen job cuts in recent years.
Some 366 million PC shipments are projected to sell in 2010, up 20% from 2009, according to a Gartner forecast made in March. Worldwide PC spending is seen reaching $245 billion, up 12% from 2009.
That’s an upward revision from Gartner’s December forecast, which previously predicted a 13% growth in PC shipments in 2010 and 2% growth in spending. n
