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Wednesday, February 20, 2008

The IT Spending Downturn

First , IDC and Forrester Research lowered their forecasts for global IT spending in 2008. Worldwide IT marketgrowth is now predicted to be 5% from 6% by IDC; and 6% from 9% by Forrester. U.S. IT market growth is predicted to be 4% from 6% by IDC; and 2.8% from 4.6% by Forrester. ChangeWave’s latest corporate IT spending survey points to a negative growth rate for the 2nd Quarter of 2008, and confirms that U.S. business spending has already entered into a recession.
Changewave survey finds that nearly one-in-four respondents ) say their company’s ITspending will decrease (or there will be no spending at all) in the 2nd Quarter – 3-pts worse than the previous survey. Only 15% say spending will increase – an unprecedented 9-pt drop from previously.

Amidst all these things, we also see that customer appetite for innovative technologies and delivery models seems to have not diminished. IDC’s Albert Pang finds that customer win announcements from enterprise applications vendors came in at a steady clip throughout the month of January 2008 suggesting that deals were still being consummated.
Offshore headquartered service providers may not be hit says Everest Group. The rationale : In bad times, companies tend to go in for bigger pieces than smaller ones. For example, if a large retailer is was doing $5 million with one vendor, they would now prefer to do $10 million. If it was $25 million, it might go up to $50 million. While you won’t be able to track this for individual clients, what you will see is that SWITCH companies will start reporting more $50 million- $100 million deals than last year.
Earlier, I wrote that captives are imploding. Everest Group now confirms that the proportion of work done by captives is reducing compared to that done by third-party firms but that doesn’t mean captives are not growing, but points out sellouts are getting more difficult than anticipated.

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