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IT industry to avoid second dotcom bust

Economic woes won't dramatically affect tech industry

Research firm Gartner said the IT industry will have to cope with decreasing budgets as a result of the current economic uncertainty, but tech firms are unlikely to face the extreme cuts seen following the dotcom bust in 2001.

Gartner analysts presenting at Symposium/ITxpo 2008 Monday in Orlando said the research firm is reducing its original forecast of 5.8 percent global IT spending growth down to 2.3 percent for 2009. In the US, the research firm expects existing 2008 budget plans to not change significantly and forecasted spending in 2009 to remain flat.

"In the worst case scenario, our research indicates an IT spending increase of 2.3 percent in 2009, down from our earlier projection of 5.8 percent," said Peter Sondergaard, senior vice president at Gartner and global head of research. "Developed economies, especially the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009; the United States and Japan will be flat."

While the financial events of the past few weeks will impact 2009, Gartner said it doesn't expect the fallout to be as significant as the recession of 2001. Due in part to the "dramatic reductions" made in response to the dotcom bust, Sondergaard said the IT industry is better prepared to respond to today's economic woes. According to Gartner, IT budgets were "slashed from mid-double-digit growth to low single-digit growth" during and after the 2001 recession.

Also IT has been able to shift its position from a back-office cost centre, Gartner suggested, to an active partner in the business. For instance, IT is now "embedded in running all aspects of the business" and often employs "multi-year IT programmes aligned with the business," which are more difficult to cut in the short term. Gartner also pointed out that IT spending decreases "lag the economy by at least two quarters".

"What [CEOs] want now most of all is agile leadership. Leadership that can guide us through simultaneous cost control and expansion at the same time," Sondergaard said.

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