A year ago, IT spending fell off a cliff. The key question is will it make a comeback in this quarter?

There's a lot at stake. Hardware and software companies are hoping that IT spending will make a strong comeback this quarter because of all the pent up demand and because there's a lot of aging IT gear out there.

In mid-June I met with Gary Budzinski, senior VP at Hewlett-Packard's Services group. Mr Budzinski said that a lot of companies delayed upgrading their software and hardware because of the financial collapse last September.

"Things tend to break after a while," says Mr Budzinski.

Many companies extended their maintenance contracts, but, at some point, that won't be enough and IT systems will start failing on a larger scale.

Predicting IT failure is not a hard thing to do. When you deal with tens of thousands, and even hundreds of thousands of servers, data storage systems, network equipment, etc, it's a relatively simple statistical exercise.

"There's a big crunch coming," says Mr Budzinski.

Companies will start to experience ever greater IT failures unless they start buying new hardware.

Currently, a large part of an organization's IT budget is being spent on regulatory compliance issues, and on security, which is related to regulatory compliance. Being in compliance means not going to jail.

But if you can't run your business IT applications reliably then being compliant becomes a moot point. And if you don't have a job you can't go to jail.

So, will IT spending on basic infrastructure come roaring back this quarter? Or will companies try to eek out another few months of performance out of their aging IT infrastructure?

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Please see:

Intel Mid-Year Update - Big Question Mark On Business IT Spending

Goldman Sachs predicts IT spending rise • The Register

DailyTech - HP Predicts Increased IT Spending for 2010

Forrester: 2009 IT spending will be anemic with a 2010 bounce | Between the Lines | ZDNet.com