Economic effects on IT strong but mixed, IDC predicts

According to Jean-Marc Annonier, IDC’s Research Manager for IT Spending, how vendors will be affected depends on the type of product or service they provide.

“The Australian economy is facing its biggest challenge in recent history,” he said. “Governments around the world are taking unprecedented measures to support a world financial system on the brink of meltdown.”

“The resulting recession will probably be milder in Australia than in the US and in Europe but the level of economic activity will certainly slow down across most sectors of the economy,” he said.

IDC expects slower sales brought about by the recession to most strongly and adversely impact hardware vendors.

Refresh cycles are expected to lengthen, and there will be pressure on CIOs to continue to operate ageing fleets of PCs.

Servers and storage will be less subject to cost compression but there will definitely be heavy scrutiny to ensure that costs are kept to a minimum, IDC predicts.

Meanwhile, the impact on software spending is expected to be mixed.

Spending on general purpose software such as office application suites and operating systems is expected to be significantly reduced.

However, projects designed to cut cost by boosting productivity or enhancing business operations are still likely to go ahead, at least in the short term.

Spending on software such as database, ERM and CRM is expected to continue, albeit with a slower growth rate, and investment in virtualisation is expected to continue as buyers will be looking at minimising hardware purchase.

IDC expects IT Services to benefit of the crisis. Spending on outsourcing services is expected to increase in the short term, especially in the mid-market.

The recession could also further boost demand for offshore outsourcing to low cost countries like India and China, specifically for infrastructure management and applications services.

Finally, IDC expects telecommunications to be mostly immune to the recession. Businesses are expected to revert to more telecommunications to reduce travel costs.

The transition from traditional data to IP data is expected to accelerate due to obvious cost benefits, driving the adoption of voice over broadband to reduce the cost of fixed voice.

Meanwhile, spending on mobile voice is expected to continue to grow slowly due to the tangible business benefits of mobile phones. IDC has found that competition on the Australian market has maintained prices to levels that warrant extensive business usage.

“The long period of strong economic growth that we have known is well and truly over and businesses are going to carefully assess when and where to spend their money,” Annonier said.

“The impact on IT vendors will be important. The reduced business demand for IT goods, exacerbated by a lower Australian dollar, will impact heavily on the revenue of the IT industry,” he noted.

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