Business Tech

Growth in information technology spending next year is expected to reach 1.6 percent in the United States, a substantial drop from previous forecasts.

Forrester Research's current 2009 estimate, released on Tuesday, is down from its previous forecast of 6.1 percent growth, which was issued prior to the steep drop in IT spending at the close of the third quarter.

In September, Forrester took the unusual step to outside of its usual quarterly schedule, noting that 2009 IT-spending growth would fall to 6.1 percent from previous forecasts of 10 percent growth.

"Our U.S. tech market forecast now assumes that the...decline in U.S. real GDP in (the third quarter of) 2008 will accelerate in (the fourth quarter of) 2008 and the first half of 2009, before a weak recovery starts in the half," Andrew Bartels, Forrester Research vice president, noted in the report.

Call it the elephant approach to sizing up the health of tech.

In two separate reports released Monday, Forrester Research CEO George Colony and Mayfield Fund weighed in on where they believe tech is headed in this challenging climate.

Colony, who took hold of the proverbial elephant's trunk, noted in his CounterIntuitive blog that the current recession will likely result in a tech spending slowdown, but nothing near the levels seen in the post-bubble-burst era of 2001 to 2003.

He noted CEOs and CIOs are indicating they plan to "change their way" out of the current economic doldrums, while the industry should find some comfort in the fact that technology has become more pervasive since the last downturn. So have the youthful Generation Y folks, 18- to 27-year-olds, who are far more wedded to their cell phones than previous generations, notes Colony.

Venture capital firm Mayfield Fund, meanwhile, noted in its fourth quarter report that its CEOs will rely on innovation, resilience and experience to "navigate the road ahead."

Here are a few CEO comments from the Mayfield Fund report that offer a proverbial feel of the elephant's leg, tusk, and tail:

Centrify CEO Tom Kemp: I am hoping the economic uncertainty will weed out some of our weaker competitors and cause our bigger competitors to not invest in the market.

Adchemy CEO Murthy Nukala: The combination of a recessionary macro-environment along with a dislocation of the online media landscape through advanced math techniques is creating a tremendous opportunity for performance marketing leaders like Adchemy.

Slide CEO Max Levchin: An obvious challenge--the economic downturn--is really a big opportunity for companies like Slide that can grow smart (e.g. hiring the best talent, maintaining excellent customer service, beating out competitors) during a recession.

Forrester Research on Wednesday revised its best-case-worst-case scenario for U.S. IT spending. Rather than possibly posting an upside above the base, Forrester is warning, at the extreme, the situation could get worse than its September base projections.

Back in September, Forrester made a base prediction that IT spending would grow 6.1 percent in the U.S. and between 7 to 8 percent overseas. Forrester, at the time, also noted a potential existed that IT spending could exceed its base projections.

But a dramatic downturn in the markets, a virtual chokehold on credit availability, and a financial crisis that has rapidly spread from the U.S. to world markets has prompted the research firm to revise its "alternative view" from that September report.

Forrester is now warning IT spending growth in the U.S. could come in at 2 to 3 percent for 2009 and 3 to 4 percent worldwide. And the research firm noted that some of the quarters in 2009 may actually post declines in IT spending.

"Usually, we don't change our forecast that frequently. We'll usually update it every quarter and the changes are small, like maybe 5 percent to 6 percent," said Andrew Bartels, a Forrester research analyst. "But it's been hard to ignore what's been happening in the markets in the last three weeks and we needed to take note of it in our forecast."

Forrester, however, accounted for weakness in the economy when it updated its September forecast and, as a result, has no current plans to change its base forecast. Bartels added that, given the lack of visibility companies have in this current market, it's premature to issue a completely revised 2009 outlook.

That said, Bartels is hoping companies will use Forrester's revised best-case-worst-case scenario update to make conservative plans for their businesses.

"They should assume our base is what's going to happen, but also prepare for the alternative," Bartels noted.

IT spending got a dose of good-news-bad-news Tuesday, with Forrester Research nearly doubling its projections for increased U.S. spending this year and virtually slicing growth for next year.

IT spending is expected to rise 5.4 percent this year, revised from previous Forrester projections of a 2.8 percent increase.

But next year, growth in IT spending is expected to get whacked down to 6.1 percent from previous projections of a 10 percent increase.

Forrester, which revises its annual projections on a quarterly basis to reflect changes in the economy, attributed the changes to its most recent projections based on the drama that is sweeping across the economy and world markets.

"We think the economy will turn (for the worse) in the third quarter, and if that happens, we'll see a significant slowdown in IT spending in the fourth quarter and then the first and second quarters," said Andrew Bartels, a research analyst with Forrester Research.

Forrester anticipates IT spending will improve in the second half of next year, as the current credit crunch improves, cost of energy and oil come down, and the benefits of lower interest rates begin to take hold.

And because IT spending, despite the downturn, is expected to continue growing, spending on everything from mobile to software-oriented architecture technologies is expected to accelerate rapidly once CIOs feel more confident in the economy, Bartels noted.

Added Bartels: "As soon as the economic climate gets better, CIOs will go out and get this stuff."

Tech analyst heavyweight Forrester Research just got a little bigger.

The Cambridge, Mass., company said Thursday that it acquired smaller rival JupiterResearch and its parent company JUPR Holdings for $23 million. The JupiterResearch brand will begin to serve Forrester's "Marketing and Strategy" client group.

JupiterResearch, considerably smaller than Forrester, had 83 employees and made $14 million in 2007, while Forrester Research, which has more than 1,000 employees, made $212 million.

Forrester also announced its second quarter earnings Thursday. The company had a $8.6 million profit on $63.5 million in revenue for the quarter ending June 30. Including the acquisition of JupiterResearch, the company predicts 2008 revenue between $246 million and $252 million, according to MarketWatch.