With huge job losses in manufacturing, billion-dollar writeoffs of asset-backed commercial paper and significant rise in oil and food prices, one would think the IT industry will feel the effects of a wider economic woes. But market research firm IDC’s recent checkup on the IT industry resulted in an optimistic prognosis.
IDC Canada this week offered a sneak-peek from its regular industry forecast.
“While we’re expecting a slow-down,” said IDC Canada managing director Vito Mabrucco, “there is moderate economic growth—we’re not in a recession.” He predicts that there will be a slow-down over the next five years of about four per cent, which isn’t too bad, he said.
According to the report, “IDC Canada projects more than C$79.1 billion in external spending for the total ICT market in 2008, and that it will grow to approximately C$91.8 billion by 2012.”
There is some promising spending growth in various sectors of the IT industry for 2008, he said. The hardware sector will be up 3.3 per cent, while the software industry will see 5.5 per cent’s worth of growth. The services space will get a spending growth spurt of 4.3 per cent, and communications a 2.9 per cent boost.
According to the American report, “We reaffirm our view that calls for hardware market growth in the U.S. of less than 2 per cent this year, while software spending will increase by 7 per cent and IT services by 5 per cent. Strongest growth continues to come from back-end software (system infrastructure and application development tools), network equipment, and mobile devices.”
The five-year trend sees hardware averages staying the steadiest to 2008’s numbers, with a 3.2 per cent jump. Software spending will have the biggest jump over 2008’s numbers with its 6.1 per cent five-year growth rate. Services will jump 3.8 per cent. Communications will have a measly 2.9 per cent growth in the five-year term.
The American numbers weren’t very surprising, according to IDC analyst Steve Minter. “There haven’t been a lot of changes since the end of January.” The U.S. is predicted to suffer from a two per cent drop in IT spending (from six per cent to four per cent) this year, courtesy of the “stagnant economy.” Minter said, “This slowdown comes from the economy being weak, but it’s not too dramatic.” (Western Europe rings in with a similar 4.1 per cent growth rate for IT spending this year, and Asia/Pacific with 5.4 per cent.)
Historically, Canada’s fate has been tied to that of the United States, but, said Mabrucco, “Canada has been a little more divergent as of late.” The US is also seeing slower growth (although if the recession down south gets more serious, then it could erode any Canadian gains that have been made).
When it comes to Canada, a slowed-down economy doesn’t necessarily mean that people don’t want technology anymore.
The report noted sbuying decisions will be subject to “more due diligence” – or even be delayed. IDC went on to state: “… we also expect, as we have seen in previous slowdowns in ICT spending, that there will be pent up demand for ICT, and that positioning for that upturn in spending – whether as a buyer or provider – would be a prudent approach,” said the report. “In fact, for those organizations that are looking to gain competitive advantage, there is usually never a better time than when there is uncertainty and your competitors may be holding back on revenue generating and cost saving investments like ICT.”
Said Mabrucco: “People need to be more efficient then and they need technology to do that.”
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