IDC Canada identifies 2009’s IT spending priorities

IDC Canada is predicting that a weak economy will drive down IT spending throughout 2009, with a gradual recovery in 2010. However, despite the gloomy outlook, the analyst firm has identified some key areas where spending will remain strong.

On an optimistic note the tech downturn will not be as bad as the 2001-02 downturn says Vito Mabrucco, senior vice-president, worldwide consulting and managing director, IDC Canada. The biggest impact will be in commodity hardware upgrade markets and software applications, while ongoing infrastructure projects, outsourcing and security will remain relatively resilient.

“In 2001-02, IT took a significant hit in their budget because of a lot of overbuilding of capacity, and that’s not the case now,” said Mabrucco. “This slowdown in IT spending is more related to business and consumer confidence, and both are related because as consumers slow spending, businesses ratchet down investment. But many executives also see IT as a potential strategic weapon to help them remain profitable and competitive through the downturn.”

Currently, IDC is forecasting 2009 Canadian IT spending growth of 1.7 per cent, although with a cautionary note of a potential 2.5 per cent decline on the downside. For 2010, the growth rate is forecast to rebound to 2.9 per cent, slightly above 2008 levels.

The hardest hit areas will be PCs and servers, where spending is forecast to decline by 2.9 per cent and 1.0 per cent respectively. Storage spending will also decline 0.2 per cent. Within PCs, desktop spending will drop 9.4 per cent, but strength is forecast in mobility and netbooks, where growth is pegged to hit 19.3 per cent.

“Usually the first thing that gets hit in a capital intensive markets is IT purchases, and that’s why we see hardware, PCs, servers and storage taking hits,” said Mabrucco. “The rest of the works are still showing growth, but they’re slowing down.”

The software category is showing strength at 3.9 per cent growth, followed by telecom at 3.2 per cent, networking at 2.9 per cent and services at 2.6 per cent. Mabrucco says the networking space remains fairly stable.

“There’s still a proliferation of endpoints, mobile devices and handhelds that are converging on the network,” said Mabrucco. “And with Web 2.0 and social networking, there’s a lot more services growing on the network.”

In the software space, Mabrucco says security is fairly recession-proof, and CRM, ERP and collaborative applications are opportunities in the enterprise applications arena as businesses focus on reducing costs and increasing efficiencies.

For the channel, Mabrucco says 2009 will be challenging for systems integration partners, as projects could be delayed or re-scoped. Partners in managed services or support services could find opportunity though. Clients looking to extend the lifecycle of their hardware will need maintenance services, and some clients may look to buy computing services rather than computing equipment, creating a need for managed storage, security, and VoIP.

“It could be a good time for partners to reassess their offerings to focus on the core business requirements of keeping the lights on, or those services that can be a cost-reduction for their customer,” said Mabrucco.

He adds partners should look to do more with their existing customers rather than focus on new customer acquisition.

“Partners should find customers where have strong relationships and focus on increasing their share of wallet within those customers rather than going out and trying to find new customers,” said Mabrucco. “Redirect effort to nurturing strong customers and relationships, and capture more of their spend. Go deeper and broader.”

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Jim Love, Chief Content Officer, IT World Canada

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Jeff Jedras
Jeff Jedras
A veteran technology and business journalist, Jeff Jedras began his career in technology journalism in the late 1990s, covering the booming (and later busting) Ottawa technology sector for Silicon Valley North and the Ottawa Business Journal, as well as everything from municipal politics to real estate. He later covered the technology scene in Vancouver before joining IT World Canada in Toronto in 2005, covering enterprise IT for ComputerWorld Canada. He would go on to cover the channel as an assistant editor with CDN. His writing has appeared in the Vancouver Sun, the Ottawa Citizen and a wide range of industry trade publications.

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