US IT Spend Hits $761B Next Year; Global IT Spending to Surpass $2 trillion Mark - Forrester

Global purchases of IT goods and services will slow to 5% growth in 2007, reaching $1.55 trillion in sales according to a new report detailing worldwide technology spending and purchases by Forrester Research. US purchases of IT goods and services will also grow 5% in 2007, the slowest rate of growth since 2003. Forrester's forecast for US IT spending growth is up from the previous estimate of 2%.

Forrester's 2007 forecast:

  • Global IT purchases: up 5% to $1.55 trillion, compared with 8% growth in 2006.
  • Global IT spending: up 6% to $2.02 trillion, compared with 8% growth in 2006.
  • US IT purchases: up 5% to $527 billion, compared with 6% growth in 2006.
  • US IT spending: up 5% to 761 billion, compared with 6% growth in 2006.

Forrester's definitions: 

  • IT purchases: purchases from vendors of IT goods like computers or software and of IT services like systems integration or outsourcing
  • IT spending: on an operating budget basis, the depreciated value of capital purchases in IT goods, plus IT services purchases, plus IT staff costs. 

Technology vendors are most concerned with IT purchases, which represent revenues for them; CIOs looking to benchmark their IT spending on an income-statement basis are focused on IT spending.

"This is a caution flag for IT vendors; 2007 will be a challenging environment," said Andrew Bartels, Vice President, Forrester Research. "Sales in the US — the largest single technology-buying market in the world — will be hard to come by as CIOs reduce or delay IT purchases. The single most important variable impacting future technology spending worldwide is the state of the US economy."

2007 Global IT Purchases (By Technology)

  • Software purchases will do better than average, growing 7 percent, down from 10 percent growth in 2006.
  • Computer equipment will continue to face slowing demand, up only 4 percent from 6 percent in 2006.
  • Communications equipment will slow down significantly, growing 3 percent from 9 percent in 2006.
  • IT services and outsourcing will increase 4 percent, down from 8 percent in 2006.

2007 Global IT Purchases (By Geography)

  • US: Up 5 percent as noted above.
  • Americas (excluding US): The slowdown in the US will ripple through Canada and the rest of the Americas, causing modest 3 percent growth.
  • EMEA: A hybrid of slow but steady growth of 4 percent in Western Europe and much stronger growth of 15 percent in Eastern Europe, the Middle East, and Africa will result in 5 percent overall growth in this region.
  • Asia Pacific: After blistering 12 percent growth in 2006, the slowing US economy will have a severe negative impact on both Asian economic growth and Asian IT purchases, resulting in 4 percent growth next year.

Near-term, the health of the US technology industry appears more robust. The quarterly Forrester/ITAA US Tech Sector Index posted a 3.2-point gain in Q3 to stand at 126.4, the highest the index has been in more than five years. The strong showing was the result of a surge in US vendor profits and CIO confidence (two of the 11 measures that make up the index). However, an overall weakening of the economy throughout 2006 has caused a decline in Forrester's outlook for fourth-quarter business purchases in IT.

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