Big Global IT Business Falters

As business comes to rely increasingly on computers and software, the IT industry should be flourishing. Yet, it is not. Fear of a slowdown in economies around the world has almost halted the growth of the industry, and it may even cause it to shrink late this year or next. Because the sector is fairly young and tech is universally used among both large companies and small, the trend is alarming, as it could well be a leading indicator of business confidence.

IT industry research firm Gartner recently reported:

Worldwide IT spending is on pace to reach $3.6 trillion in 2012, a 3 percent increase from 2011 spending of $3.5 trillion.

However, the firm acknowledges this is bad news:

“While the challenges facing global economic growth persist — the eurozone crisis, weaker U.S. recovery, a slowdown in China — the outlook has at least stabilized,” said Richard Gordon, research vice president at Gartner. “There has been little change in either business confidence or consumer sentiment in the past quarter, so the short-term outlook is for continued caution in IT spending.”

Actually, business confidence has begun to flag throughout Europe and in the United States in the most recent few weeks. And it is likely to have done so in China, where gross domestic product may be rising at only 7% in May and June instead of the 10% that has been usual over the past decade.

IT spending is rarely pushed out into the future for companies and governments that need to make their operations more and more efficient. This should be particularly true for businesses that have grown modestly without adding employees. Technology efficiency often makes up for lean staffs. If companies have started to abandon this pattern, the number of them that expect any sales growth at all has likely fallen.

The “Gartner Worldwide IT Spending Forecast, 2Q12 Update” shows that a period of caution has already begun. Based on the current state of the global economy, its third quarter report is likely to show worse results.

Douglas A. McIntyre