Wary Europeans to hurt global IT spending

Fri Jan 6, 2012 3:19am IST

A man browses web at an Internet cafe in Madrid May 23, 2008. REUTERS/Andrea Comas/Files

A man browses web at an Internet cafe in Madrid May 23, 2008.

Credit: Reuters/Andrea Comas/Files

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(Reuters) - Global spending on information technology (IT) will rise at the slowest pace in three years in 2012 as Europeans, worried about the region's sovereign debt crisis, are cutting back on investments, research firms said on Thursday.

"When we look at the euro zone, the scenarios range from bad to very bad to catastrophic," Richard Gordon, research vice president at Gartner, told Reuters on Thursday.

"We've taken the bad scenario, but things could turn much worse. At the moment we assume it will muddle through and find some kind of solution," he said.

Gartner predicted global IT spending, a bellwether of firms' willingness to invest, would rise 3.7 percent in 2012, down from its earlier estimate of 4.6 percent growth.

The forecast for western Europe was slashed to a 0.7 percent drop in spending from a previously expected rise of 3.4 percent.

"The main reason is ongoing uncertainty around the euro zone: this is going to impact business and private confidence," Gordon said.

Governments' austerity measures were likely to weigh on public IT spending, while the woes of financial services industry would likely weigh on investments there, he added.

At the same time, technology research firm Forrester lowered its forecast for 2012 growth on the global IT market, excluding communications services, to 5.4 percent from its September forecast of 5.5 percent.

Forrester estimated the market grew last year 9.6 percent when measured in U.S. dollars.

"We are assuming that the European economies will go into a recession, but we are assuming it will be a fairly modest recession based on the austerity programs hitting so many countries," said Forrester analyst Andrew Bartels, adding the breakup of euro zone would make outlook a lot worse.


Buyers, especially in the United States, will continue to invest in a new generation of technology that combines mobility, cloud, and analytics, even though they are facing economic uncertainty, Forrester's Bartels said.

Gartner's Gordon said there was still quite strong growth in emerging markets and predicted more resilient sectors, like software sales and telecom gear, would drive worldwide growth.

But the 3.7 percent global growth forecast was historically a modest number, he added.

In 2011, worldwide IT spending totalled $3.7 trillion, up 6.9 percent from 2010, when the growth was around 6 percent.

On top of macroeconomic worries, the impact of floods in Thailand on hard-disk drive (HDD.L) production would hit the technology sector in 2012, Gartner said.

The floods would cut the supply of HDDs by 25 percent or more during the next six to nine months as Thailand has been a major hub for finished HDDs and their components, it said.

"Rebuilding the destroyed manufacturing facilities will also take time and the effects of this will continue to ripple throughout 2012 and very likely into 2013," Gordon said.

Gartner said that, due to the HDD shortages and the cautious environment for hardware spending, it had also cut its PC shipment forecast.

(Editing by Mark Potter, Gary Hill)

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