IT economy goes further off the rails

IT economy goes further off the rails

It was a grim week: Intel cut its sales forecast, Sun announced big layoffs, and IDC lowered its IT spending projections for next year.

The drumbeat of economic bad news louder in the IT industry last week, as Intel reduced its fourth-quarter revenue forecast by as much as 20 percent and Sun Microsystems announced plans to lay off up to 18 percent of its workforce.

Even India is feeling the economic wallop: The country's largest technology trade group sharply cut its IT services hiring projections.

Meanwhile, market research firm IDC lowered its IT spending forecast for 2009, saying it now expects worldwide spending to grow by just 2.6 percent over this year's level -- less than half its earlier 5.9 percent prediction. IDC now expects IT spending in the US to grow a minuscule 0.9 percent next year.

Gartner similarly reduced its spending outlook last month, projecting 2.3 percent growth globally in 2009.

The more pessimistic forecasts were reinforced by survey results released last week by technology reseller CDW, which commissions a bimonthly survey of IT decision-makers by an outside polling firm, said that in the latest survey, managing operational costs was the most-cited priority for next year.

Forty-one percent of the 1,058 respondents included cost management among their priorities. In comparison, 35 percent cited increasing their companies' market share and improving customer satisfaction, while 33 percent said that making technology improvements was a priority. The survey was conducted from September 15 to 22, a time when the economic situation was just starting to go from bad to worse.

Prior to the Society for Information Management's annual member conference last week, Jerry Luftman, a professor at Stevens Institute of Technology and vice president of academic affairs at SIM, said that IT executives have been more proactive about reining in spending than they were during the dot-com bust and post-9/11 downturn.

That's reflected in the results of an online survey SIM conducted in June that had more than 300 respondents from 231 organizations. Among the findings: Respondents said they expected the average percentage of their IT budgets devoted to offshore work to increase from 3.3 percent this year to 5.6 percent in 2009.

However, only 15 percent of the respondents said they expected to reduce their IT head counts next year. Although the survey was conducted before the downturn accelerated, Luftman said he doesn't anticipate a big increase in the number of job cuts.

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