Software & Technology

IT spend: dropping across sub sectors and industry verticals

The U.S. IT and technology sector accounts for about 4% of the country’s GDP. With the economy sliding into a recession, U.S. IT spending is expected to decline by 9.3% to $526 billion in 2009 against an annual growth of 4.1% to $580 billion in 2008. This decline has already been evident across client verticals and all categories of IT purchases. However, with the economy now showing signs of revival, the industry is expected to see a recovery starting in Q4 2009 that may culminate in a strong growth of about 7.7% in 2010.

According to a survey by IT consulting firm Forrester, companies from all industrial verticals are expecting a cut in their spending, amid slow growth in business due to reduced market opportunities in such troubled times. The survey results highlighted that about 44% of the respondents expected a decline in IT purchases, while 43% predicted the IT purchase to remain the same and only 14% forecast an increase in 2009. Among the various client segments, about 49% of respondents each from manufacturing and retail and wholesale expected a decline in their IT expenditure this year. For the finance and insurance sectors, which were most affected, this figure was 46%. Clients from the utilities and telecom sector were most optimistic of technology expenditure, with about 25% of respondents from the segment expecting an increase in IT spending in 2009.

The strain in the financial sector, which accounts for about 21% of U.S. software spending, has significantly impacted the growth of the software and technology sector. Likewise, the slowdown in the manufacturing sector, accounting for about 15% to 18% of U.S. software spending, has had a major impact on the software sector.

The slowdown in the software and technology industry led to a large reduction in 2008 and the first half of 2009. According to consulting firm Challenger, Gray & Christmas, the U.S. software and technology sector reduced the total headcounts by 187,000 in 2008, the highest number of job losses in the last five years. All major players from the sector announced significant job cuts during the period.

The U.S. IT and technology sector accounts for about 4% of the country’s GDP. With the economy sliding into a recession, U.S. IT spending is expected to decline by 9.3% to $526 billion in 2009 against an annual growth of 4.1% to $580 billion in 2008.

The U.S. financial sector accounts for 21% of U.S. software and technology sector spending, which highlights the huge impact of collapse in the financial sector.