11:09 AM

IDC: Boom In Global IT Spending Forecast Despite Short-Term Economic Concerns

International Data Corporation (IDC) raised its forecast for global IT spending in 2010 because of very strong growth in the first half of this year.

Companies are catching up with infrastructure investments following a very weak 2009. Servers and other vital equipment are being replaced in the US and European markets, while emerging economies are making large investments in new IT systems.

IDC estimates that global IT spending will be $1.51 trillion in 2010 - 6% growth in constant currency. The largest growth will be in hardware - up 11% to $624 billion; software will be up 4%; and services revenue will improve by 2%.

From IDC:

- U.S. IT markets will grow 5% this year, recovering from a 4% plunge in 2009.

- Western Europe is expected to post IT spending growth of 3% in constant currency.

- Japan is on course for growth of just 0.5%.

Emerging economies will have the strongest growth:

- China is expected to grow 21% in constant currency.

- Russia 17%.

- Brazil 14%.

-India will be up 13%.

However, IDC analysts are concerned that robust IT spending could be derailed by fragile US and European economies.

Stephen Minton, vice president of Worldwide IT Markets and Strategies at IDC:

We stand in the middle of two powerful and opposing forces. On the one hand, the very real pent-up demand for new IT investment, which has driven the solid recovery in the first half of 2010 and which will hopefully continue into 2011.

On the other hand, the potential loss of confidence in a global economy which remains extremely vulnerable to any further escalation of the European debt crisis or a deterioration in the U.S. stock market. The next three months will be crucial to determining which of these scenarios is more likely; in the meantime, IT vendors should plan accordingly by understanding the potential impact on their near-term revenues.

Foremski's Take:

Despite the real concerns about fragile economies, much of the IT spending is necessary to keep IT data centers running. Many companies postponed upgrades last year and in 2008 but the lifespan of servers and other IT equipment cannot be extended indefinitely.

If IT equipment isn't replaced there is a real danger of massive IT failures. Spending on IT will have to happen even if the economy is weak otherwise many companies simply won't be able to stay in business because of failing data centers.

Last year, Gary Budzinski, senior VP at Hewlett-Packard's Services Group, told me that if companies didn't start replacing aging IT systems, they would start to break down in large numbers.

The coming "big crunch" - IT systems will start failing on a large scale

Things tend to break after a while...There's a big crunch coming," says Mr Budzinski. Companies will start to experience ever greater IT failures unless they start buying new hardware.

Mr Budzinski's group is paid to make sure client systems continue to run. As those systems age, HP increases its fees for maintenance, until they reach a point where new hardware is less expensive than trying to keep the old systems running.