Gartner and UBS provide a mixed view on IT spending

Growth in information technology spending next year is expected to go from a modest uptick to a virtual blip, according to a report released Monday by Gartner Research. Meanwhile UBS Securities predicts a more dire outcome.

IT spending is expected to grow 2.3 percent next year, a figure that's down from earlier projections of 5.8 percent growth, according to Gartner. The lowered forecast comes as the markets have been whacked particularly hard over the past two weeks and the credit market has tightened.

"Developed economies, especially in the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009, the United States and Japan will be flat," Peter Sondergaard, global head of research at Gartner, said in a statement.

And while Gartner expects IT spending will be greatly affected in the fourth quarter as the economic climate has taken a toll in the past two weeks, the research firm does not believe the full year outlook will substantially change for IT spending.

UBS, however, has a different assessment on IT spending. In a research note released Monday, it forecasts a 5 percent to 15 percent drop in IT spending in 2008, over last year.

And here's why:

Two key trends driving spend lower include: 1) revenue pressures, write-offs and cash conservation that are causing financial institutions to look at technology spending for savings as it typically accounts for the largest non-personnel expense on the P&L and 2) people are thinking about buying less yet still being able to do more. Looking out to the December quarter, while the year end is typically the busiest period to close deals with vendors, expectations are that there are not likely to be purchases of any meaningful size in 4Q this year suggesting that the typical Q4 budget flush is unlikely to occur.

And 2009 may not fare any better, with UBS analysts noting while it is difficult to access the year at this point in time, the research firm would not be surprised to see IT spending fall by a similar 5 to 15 percent next year.

Within the hardware sector, UBS expects to see storage demand drop next year, but not to the same degree as servers, which tend to have excess capacity at companies, followed by desktops, which are viewed as purchases that can easily be delayed.

And within the software sector, security software is expected to actually post double-digit gains this year, as well as next.

UBS expects security software spending to rise 10 percent this year, over the previous year and jump to an additional 15 percent increase next year over the current year.

The reasoning relates to the economy and layoffs that are expected to ensue across the corporate landscape.

Companies tend to ramp up on security software during times of layoffs, in a move to prevent soon-to-be ex-employees from walking off with corporate secrets and customer lists. Businesses also tend to ramp up on security software during economic downturns to prevent hackers from taking down their operations, notes UBS.

[YankeePoodle]

UBS,
the so called experts of money and management. Wow!!! the guys who brought on to us the current economic mess because they did not really understand the risks. These experts are giving another opinion and non-sense white paper, for we the lame idiots to read.

Good grief, set your own house in order UBS, this man is not hearing your baloney anymore.

[dargon19888]

You can't blame the economy on the UBS analyst who's trying to forecast IT spending. Two different tentacles from the same beast.

But I do agree that the UBS analyst is being a bit of a conservative twit.

[kng863]

What I find funny and ironic about this article is the last comment. "Companies tend to ramp up on security software during times of layoffs, in a move to prevent soon-to-be ex-employees from walking off with corporate secrets and customer lists. Businesses also tend to ramp up on security software during economic downturns to prevent hackers from taking down their operations, notes UBS." I've read so many disgruntled UBS IT employees who got layoffed that became hackers. It might be an exaggeration, but there was one employee who had prepared a scheduled logic-bomb to go off after he left a company. That logic bomb brought down trading servers for weeks and no one had a clue how to fix it or recover the lost revenue. Considering the size of ubs, I bet each cycle of ubs layoffs, a brand new security team is hired even though they might already have a division for it. You need a security team to keep an eye out against another security team. No one who is gonna challenge the bureacratic IT professionals who are basically milking the system via fear.