As bad as the technology market fared in the first quarter of this year, the worst may be over, at least in the US, Forrester Research said in a report yesterday.
The Cambridge, Massachusetts-based research firm nonetheless revised its forecast for this year. It now expects the US technology market to shrink by 5 percent this year. In March, Forrester predicted a 3 percent decline in spending on technology products and services.
The recession and the big drops businesses made in investments — and technology investments in particular — caused the decline. Businesses and governments overreacted to the global recession and credit crisis, Forrester said, by cutting back too much on spending in the past nine months. As companies realize that the recession is not as deep, or as long-lasting, as they feared, they will resume technology spending, it said.
“The good news is that it is in the past. We are not going into a terrible terrible downturn,” Forrester analyst Andrew Bartels said.
The research firm expects the US tech sector to hit bottom in the third quarter and to begin its recovery in the fourth.
Every sector of the tech economy has been hit by the recession.
Forrester expects spending on communications equipment to drop by 11 percent this year as businesses are spending less on network equipment, mobile gadgets and video conferencing technology. Growth will resume next year, when Forrester expects telecom spending to grow by about 7 percent.
Spending on computer products is also expected to decline by 10 percent this year, though it will increase by nearly 12 percent next year. Even so, in terms of billions of dollars, spending next year will still be below 2007 levels, it said.
Outsourcing is the only technology sector expected to see growth this year — and even that is only estimated at 2 percent.
The global tech market is faring worse than in the US. Forrester now expects spending to decline by 10.6 percent this year, far below the 3 percent decline it predicted in December. A worsening worldwide economy, along with currency fluctuations are big reasons for this.
“Large declines in business technology investment during the first quarter prompted Forrester to update its forecasts for technology spending,” the firm said.
Worldwide, purchases of computer equipment will fall 13.5 percent from last year and communications equipment will decline 12.4 percent, while spending on software will drop 8.2 percent and on information-technology consulting and outsourcing services it will decrease by 8.6 percent, Forrester said.