Forrester Sees Slowdown in IT Spending

Posted on October 11, 2005

A CNET article reports on a new Forrester Research study that sees a drop in IT spending from +7% during 2005 and 2006 to only +2% during 2007.

The forecast is based on spending trends, which show that IT markets are driven mainly by overall economic growth and adoption of new technology. The current period of Internet adoption, which began in 2001, has seen overall tech spending averaging the 7 percent growth in nominal U.S. gross domestic product.
Forrester expects gross domestic product growth to slow over the next two to three years due to factors such as spiraling interest rates, rising energy prices and a likely drop in the housing market. This, in turn, will slow growth in tech spending as 2007 approaches.

Based on what Andrew Bartels at Forrester is saying it sounds like a must-have technology would be needed to kick IT spending back up into the 7% range.

"Technology spending is currently very brittle," Andrew Bartels, vice president at Forrester, said in a statement. "Without a 'must-have technology,' most businesses are only investing in technologies with tangible (return on investment). That means they will respond quickly if corporate revenues and earnings start to slow in an economic slowdown, which seems likely at some point in the next couple of years."

Endless security problems from spam and viruses, that force companies to continue to spend money, may be the only reason Forrester is not dropping IT spending into negative figures.