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Posted by Andrew Bartels on June 2, 2012
Haven't we seen this show before? Like last year? Once again, Europe wrestles with and is again losing against its debt crisis. Once again, after some promising growth in late 2011, the US economy is showing signs of losing steam. Once again, China and India are flashing distress signals. And once again, John Boehner and the Congressional Republicans are threatening to refuse to raise the US debt ceiling unless US Federal spending is cut sharply.
Last year, the mid-year economic troubles did take their toll on tech purchases in the third and four quarters of 2011, but a last-minute resolution to the US debt ceiling issue, the European Central Bank's aggressive lending to banks so they could buy Italian and Spanish government debt, and some strength in US consumer spending, Germany's surprisingly strong growth, and continued growth in China revived global economic growth in Q4 2011 and into Q1 2012. Much depends on whether this pattern of slump and revival will recur again in 2012. My bet is that we will in fact see the same pattern.
So, let's look at the economic evidence, and then the tech market evidence.
Turning to the tech market, the slumping economies of Asia and North America and the recession in Europe has clearly slowed growth in global tech purchases, though with uneven regional impacts.
While I still retain a moderately positive outlook for the US and global tech markets despite the dark clouds, the risks of a tech downturn that follows a deeper recession in Europe and slower growth in the US and Asia Pacific have now risen to around 30%.
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