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Oct 14, 2008

Gartner: IT spending to fall

Gartner Inc, the world's biggest technology research company, sharply cut its forecast for global technology spending next year, seeing declines in spending in Western Europe and in sales of computer hardware.

The company, whose forecasts are closely watched by investors, said information technology spending could rise only 2.3 per cent in 2009, hitting $3.5 trillion with businesses cutting back budgets as the economic crisis spreads.

"Developed economies, especially the United States and Western Europe, will be the worst affected, but emerging regions will not be immune," said Peter Sondergaard, Gartner's senior vice president and head of research.

Gartner had previously forecast that corporate spending on hardware, software, telecommunications goods and technology services would grow 5.8 per cent next year. Sondergaard described the new forecast as a "worst-case scenario," but said in an interview that the outlook could get even worse if the economy continues to weaken.

That is because corporate technology spending generally closely tracks changes in economic growth, he said.

If the economy goes into a prolonged recession next year with GDP declining, then overall IT spending could fall next year compared to 2008, Sondergaard said.

"We're going to be updating our clients," he said. Gartner expects hardware to be hardest hit, with overall sales declining 4 per cent next year. It forecasts that the information technology services sector will be flat next year, while telecommunications will grow 3.9 per cent.

The firm expects software sector revenue to climb 8.6 per cent, a slowdown from a 13.5 per cent revenue increase in 2008. Investors closely watch Gartner's forecasts, as they do surveys from Wall Street brokerages such as Goldman Sachs, for evidence of changes in corporate spending plans.
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