The tech slowdown will continue up to the third quarter of 2009, according to global research firm Forrester. IT consulting and systems integration services will hit the wall in 2009, while IT outsourcing growth will remain moderate in 2009 and 2010, getting a small respite from the economic slowdown, it said in its report released on Thursday.
Because of the slowdown, companies will turn to vendors that can help cut costs, but growth in IT outsourcing revenues will remain moderate due to the use of lower-cost offshore resources and smaller-scale outsourcing deals, among other reasons, according to the report.
On a positive note, the Research firm said that while the US IT market outlook is bad, it is better than the 2001-02 technology downturn. “This time, computer equipment vendors will see declines of 5-10% in US revenues on a quarterly basis, not the 20% to 25% drops of the early 2000s,” said Andrew Bartels, the report’s author and vice-president, Forrester Research.
Forrester has projected a growth of 1.6% growth in IT spends for 2009, assuming a decline in US GDP in the third quarter of 2008. The decline will accelerate in the fourth quarter of 2008 and the first half of 2009 before a weak recovery starts in the second half, the report titled ‘US IT Market Outlook: Q4 2008’ said.
The report is based on an analysis of US Department of Commerce data and the financial reports of 49 IT vendors.
The industries that present the best opportunities for IT vendors in 2009 will be the federal government, primary production, consumer products and pharmaceuticals, chemicals and oil and gas, public services like healthcare and education, insurance, utilities, telecom, and most professional services which will not be impacted much by the recession.
On the other hand, those most likely cut back their IT purchases are IT goods and services including financial services, consumer durables, construction and housing, retail, and industrial products (including autos).
The financial services industry is expected to cut IT purchases by 3% in 2008 and by 4% in 2009. While the construction industry is expected to cut purchases back by 2% in 2008 and 2009. The retail industry will have no growth in IT purchases in 2009, and IT buying by industrial manufacturing will slow to 1% in 2009, it noted.
Those with mixed IT buying prospects include high-tech products, wholesale trade, media and entertainment, transportation and logistics. Some professional services like consulting and advertising services will see slowing of growth in either 2008 or 2009, it pointed out.
Source: Economic Times
Showing posts with label IT outsourcing. Show all posts
Showing posts with label IT outsourcing. Show all posts
Friday, December 12, 2008
Thursday, December 4, 2008
40pc of large businesses cut their IT budgets
More than 40 percent of large businesses have cut their IT budgets this year due to the global economic slowdown, according to a new survey by Forrester Research. The Forrester Business Data Services report surveyed nearly 950 senior IT managers across North America and Europe regarding their IT services spending and overall services strategies and priorities.
The economy’s affect on IT spending is evident in some specific data points contained in the report: Forty-three percent of firms have already cut their overall IT budgets in 2008 in reaction to the slow down in the global economy, while 24 percent of firms have put discretionary spending on hold. Twenty-eight percent of respondents said the economy has had no impact on their IT budgets.
Asked how the economy will affect IT services spending, 70 percent of respondents said they will likely negotiate lower rates with suppliers, and 16 percent said they have already cut their IT services spending.
IT departments in the financial services industry were hit hardest — 49 percent of IT shops in the financial services sector have cut their budgets. At the other end of the spectrum is the media, entertainment, and leisure industry, where only 39 percent of respondents said they have had to reduce spending.
IT departments in North America have been affected by the economy more than their European counterparts: 49 percent of North American firms have cut their IT budgets compared with 31 percent of respondents in Europe; although it should be noted that the Forrester survey was fielded in Q2 2008 prior to the deteriorating economic conditions in Europe.
“This is not an across-the-board spending slowdown; the impact of the economy on IT budgets varies widely by industry and geography,” said Forrester Research vice president and principal analyst John C. McCarthy, who is in India at present for a workshop. “With regard to the services sector, the slowdown has firms renegotiating rates, being more selective in choosing vendors, and examining spending plans more thoroughly, but they are still expecting to pay more for services. The demand for enterprise IT services has not dropped significantly.”
Regarding the state of spending on enterprise IT services, the report illustrates a number of trends: The demand for services holds steady. Forty-five percent of firms plan to increase their use of applications outsourcing, while 43 percent of firms are increasing their use of infrastructure outsourcing. Forty-three percent of respondents said they are moving more work offshore.
Infrastructure outsourcing expects to grow. Convergent telecommunications and network management is a hot area of growth as 20 percent of firms will outsource this service in 2008.
Few firms have fully tapped into offshore resources. Only 9 percent of firms use offshore resources wherever and whenever possible. A growing number of firms are interested in exploring more offshore work, with 14 percent ramping up use, 19 percent piloting, and 22 percent not using offshore but actively tracking developments. Of those firms not sending work offshore, a majority cite the questionable quality of the work done.
Satisfaction with outsourcing remains low. While overall firms are satisfied with their decision to use a third party, 52 percent say their biggest challenge with existing IT services and outsourcing relationships is that cost savings are lower than expected. Other noteworthy challenges include inconsistent or poor service quality (40 percent) and the inability of the vendor or contract structure to respond rapidly to changing business needs (35 percent).
The economy’s affect on IT spending is evident in some specific data points contained in the report: Forty-three percent of firms have already cut their overall IT budgets in 2008 in reaction to the slow down in the global economy, while 24 percent of firms have put discretionary spending on hold. Twenty-eight percent of respondents said the economy has had no impact on their IT budgets.
Asked how the economy will affect IT services spending, 70 percent of respondents said they will likely negotiate lower rates with suppliers, and 16 percent said they have already cut their IT services spending.
IT departments in the financial services industry were hit hardest — 49 percent of IT shops in the financial services sector have cut their budgets. At the other end of the spectrum is the media, entertainment, and leisure industry, where only 39 percent of respondents said they have had to reduce spending.
IT departments in North America have been affected by the economy more than their European counterparts: 49 percent of North American firms have cut their IT budgets compared with 31 percent of respondents in Europe; although it should be noted that the Forrester survey was fielded in Q2 2008 prior to the deteriorating economic conditions in Europe.
“This is not an across-the-board spending slowdown; the impact of the economy on IT budgets varies widely by industry and geography,” said Forrester Research vice president and principal analyst John C. McCarthy, who is in India at present for a workshop. “With regard to the services sector, the slowdown has firms renegotiating rates, being more selective in choosing vendors, and examining spending plans more thoroughly, but they are still expecting to pay more for services. The demand for enterprise IT services has not dropped significantly.”
Regarding the state of spending on enterprise IT services, the report illustrates a number of trends: The demand for services holds steady. Forty-five percent of firms plan to increase their use of applications outsourcing, while 43 percent of firms are increasing their use of infrastructure outsourcing. Forty-three percent of respondents said they are moving more work offshore.
Infrastructure outsourcing expects to grow. Convergent telecommunications and network management is a hot area of growth as 20 percent of firms will outsource this service in 2008.
Few firms have fully tapped into offshore resources. Only 9 percent of firms use offshore resources wherever and whenever possible. A growing number of firms are interested in exploring more offshore work, with 14 percent ramping up use, 19 percent piloting, and 22 percent not using offshore but actively tracking developments. Of those firms not sending work offshore, a majority cite the questionable quality of the work done.
Satisfaction with outsourcing remains low. While overall firms are satisfied with their decision to use a third party, 52 percent say their biggest challenge with existing IT services and outsourcing relationships is that cost savings are lower than expected. Other noteworthy challenges include inconsistent or poor service quality (40 percent) and the inability of the vendor or contract structure to respond rapidly to changing business needs (35 percent).
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