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Gartner Backtracks On Earlier IT Spending Growth Projections

Gartner on Monday said the current global economic problems could result in IT spending growth next year falling to less than half of the market researcher's previous projection.

In a worst-case scenario, IT spending growth could drop to 2.3% instead of the 5.8% increase previously expected by Gartner. Developed economies, particularly the United States and Europe, are expected to be affected the worst. Europe will suffer negative growth in 2009, while the United States and Japan will be flat, Gartner said. Emerging economies are expected to see much higher growth rates.

The volatile stock market and stagnant credit market during the last two weeks will have an impact on IT budgets in the fourth quarter, but not enough to change the overall gain in spending for 2008, the researcher said. The IT industry experienced more dramatic reductions during, and after, the 2001 recession that followed the dot-com bust. Growth rates at that time fell from the mid-double digits to the low single digits.

The reasons IT spending will not see more severe reductions this year and next is because IT has become embedded in running all aspects of the business. In addition, there's been a shift to multiyear IT programs that are difficult to cut immediately. Finally, IT spending decreases typically lag the economy by at least two quarters.

Since the dot-com bust, the role of IT executives has also changed. "CEOs want their executives and managers to be advisers and counselors, not just great implementers of directions given to them," Gartner analyst Peter Sondergaard said in a statement. "What they want now most of all is agile leadership. Leadership that can guide us through simultaneous cost control and expansion."

Gartner is not the only analyst firm expecting lower spending growth. Forrester Research last month upped its tech spending projection for this year to $572 billion, up 5.4% from last year. That's 2 percentage points higher than Forrester's previous projection. The firm, however, lowered its forecast for next year to 6.1% higher than this year, which is not nearly as robust as the 9.4% growth rate previously forecast.