Forrester: IT faces prolonged recession

Research firm warns a sustained recession could lead to "several quarters of declines in purchases".

Forrester Research warned technology vendor clients that IT spending could be set for a "long and deep recession."

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," said Forrester analyst Andrew Bartels.

This is the first time that 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.

In September, Forrester revised its US IT spending forecast for 2009, predicting global IT spending growth of seven to eight percent, but only 6.1 percent growth in the US, down from its previous forecast of 9.4 percent.

Despite the economic crisis, Forrester is sticking to its forecast of a sharp slowdown in growth for US tech purchases with no downturn.

"We are still sticking to our forecast of a sharp downturn in growth for US tech purchases with no downturn," said Bartels. "Why? Our tech market forecast already presumes the recession that is actually happening, We also expect governments and central banks will take actions to stabilize financial markets and prevent an economic disaster," said Bartels.

But, with the financial crisis now spreading around the world, Forrester warned that a sustained recession could lead to "several quarters of declines in purchases, not just two or three quarters with little or no growth in late 2008 and the first half 2009". The recession could mean annual US IT spending growth of only two to three percent and global IT spending growth of three to four percent.

Bartels notes that the downturn that Forrester and many other analysts thought would hit in the first half of 2008 is now expected to occur in the second half of the year and the first half of 2009.

Bartels' research note outlined recommendations for tech vendors having to navigate a changing economic situation. One recommendation is for vendors to focus on the US market as overseas markets weaken (especially Brazil, Russia, India, and China, known as the BRIC region). Also, Forrester warned the small and medium-sized enterprise market will be sluggish.

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