Note: The Skinny blog is written by Rick Smith, editor and co-founder of Local Tech Wire and business editor of

RESEARCH TRIANGLE PARK, N.C. – Information technology spending is due to increase this year by 4.6 percent over recession-repressed 2009, analysis firm Gartner says. But the news is NOT as good as the headline reads.

First, IF spending grows as Gartner expects, the surge would only return IT spending levels of 2008.

Second, much of the growth is based on Gartner’s expectations that the dollar will decline in value against other global currencies.

"While this forecast might seem bullish at first, it’s important to factor in the impact that exchange rates will have on the markets," warned Gartner’s Richard Gordon, a vice president for research. "Much of the increase in our revised 2010 forecast can be attributed to a projected decline in the value of the U.S. dollar compared to 2009."

If you don’t think corporate suits have to take currency exchange rates into consideration when plotting strategy and spending, think again.

Jim Davis, executive vice president at SAS, said that firm was worried about how a weakening dollar would affect sales in 2009. A cheaper dollar against the Euro, for example, might help SAS meet its numbers, he said, but does a cheaper dollar really mean an increase in sales? Are clients buying because of the products are cheaper or are they buying for value?

As Davis told The Skinny, he doesn’t want to make his numbers based on external factors.

The dollar did hold up better than expected, and when SAS “made” its numbers while growing revenues more than 2 percent despite the global recession, Davis breathed easier.

IBM, Cree, Google, Intel and AMD are among publicly traded high-tech firms that have reported good results already this month. And a Google executive said Wednesday that in his view the recession is over. However, he noted the recovery is uneven globally.

SAS noted the same thing in its annual review. When it grew revenues in more than 80 percent of the countries where it does business, the percentage indicates there are gaps. Plus, Davis noted that during a recent visit he made to Russia IT leaders told him they remain troubled by the economy.

So, based on the dollar and other evidence the firm sees, Gartner labels its projected recovery as “modest growth.”

Inside the Numbers

Gartner believes that what growth that occurs will be spread across all the major market segments it follows – computing hardware, software, services, telecommunications and telecom services – with overall spending expected to be $3.4 trillion.

And there is good news in that Gartner says it didn’t expect a return to 2008 spending totals until 2011.

“Our updated forecast for IT spending to reach $3.4 trillion in 2010 is actually a year earlier than we expected leveling our previous forecast update, and reflecting a bounce back in underlying IT spending from the sharp drop in 2009,” Gordon said in a statement.

Computing hardware is expected to hit $331.7 billion, up 1.6 percent from 2009. However, Gartner notes that the 2009 total was down a whopping 14 percent from 2008.

IT services spending is expected to growth 5.6 percent to $824.2 billion from 2009 (down 3.5 percent from 2008).

Software spending is likely to hit $231.5 billion, up 4.9 percent from 2009 (a 2.1 percent decline from 2008).

And the telecom sector is projected to grow 4.7 percent to $1.97 trillion from 2009 (a 3.6 percent decline from 2008).

Emerging Markets To Lead Recovery

Emerging markets are expected to pace the IT spending comeback, Gartner says.

• Latin America, up 9.3 percent

• Middle East and Africa, up 7.7 percent

• Asia/Pacific, up 7 percent

U.S. spending, meanwhile, will grow a meager 2.5 percent, but Japan is even worse at 1.8 percent growth.

Western Europe looks strong at 5.2 percent growth.

A Positive Closing Thought

It’s obvious to Gartner, however, that the global recession is ending and better days are ahead.

"Although recovery will be slow, over the next 12 to 18 months, gross domestic product (GDP) is projected to increase, consumer confidence is expected to improve, and the availability of credit should increase,” Gordon said. “At the same time, pent-up demand for new technologies will be released as enterprises focus on new growth opportunities and increase spending plans. IT vendors and service providers must ensure that they are poised to take advantage of this improving landscape."

Thank goodness, some good news for a change.


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