IT spending still a bit stalled

Forrester and Goldman Sachs predict moderate increases in IT spending for the coming year

Predictions for IT spending in 2007 echo those put forth a year ago as industry watchers expect as little as 5% more U.S. dollars will be put toward technology investments.

Separately, Forrester Research and Goldman Sachs released their forecasts for IT spending in 2007, with the latter speculating it could increase 6% to 7% and Forrester predicting just a 5% uptake in U.S. IT investments. Despite the United States being the largest IT spender in the global market (its $726 billion of spending in 2006 made up three-eighths of the world's investments), Forrester says the continued slowdown of IT spending since 2004 reflects the country's economic state.

"Our current forecast is that U.S. investment in IT goods of computers, network equipment and software will grow moderately at a 5% rate in 2007, from US$357 billion in 2006 to US$374 billion in 2007," writes Andrew Bartels, a vice president with Forrester, in a recent report. "U.S. purchases of IT goods and services (adding in IT services and outsourcing) will show similar 5% growth in 2007, reaching US$527 billion."

Forrester expects software to lead the areas in which spending increases at 7% growth, from US$142 billion last year to US$152 billion this year. The research firm forecasts investment in other areas such as computer equipment and communications equipment to grown minimally at 4% and 2%, respectively. IT services and outsourcing also will see a modest 4% increase, growing from US$147 billion last year to US$153 billion in 2007.

For its part, Goldman Sachs expects spending to increase on the low end of 6% to 7%, with verticals such as financial services, communication, manufacturing and government leading the way.

"Technology spending is now so entwined with the overall macro picture that it makes it difficult to imaging IT investment accelerating in the face of anticipated deceleration in consumer expenditures, business capital spending and overall GDP," the report reads.

On the technology front, Goldman Sachs reports while spending will be more of the same, there will be changes in adoption. The firm predicts 2007 as the year virtualization technology will go mainstream, service-oriented architecture (SOA) will move from experimentation to implementation, and Web 2.0 (or the evolving Enterprise 2.0) computing model will only begin to emerge. Incumbent IT vendors should take heed of newcomers using Enterprise 2.0 computing as a flexible computing model, Goldman Sachs warns.

"Virtualization, SOA, software-as-a-service (SaaS), VoIP, power issues in the data center, and the emerging theme of Enterprise 2.0 morphing out of Web 2.0 should open doors for new vendors and force incumbents to change product road maps, and in some cases, pricing models," the report states.