Global Tech Market To Grow By 5.4% In 2013 And 6.7% In 2014

The 2013 New Year has begun with the removal from the global tech market outlook of one risk, that of the US economy going over the fiscal cliff. On New Year's day, the US House of Representatives followed the lead of the US Senate and passed a bill that extends existing tax rates for households with $450,000 or less in income, extends unemployment insurance benefits for 2 million Americans, and renews tax credits for child care, college tuition, and renewable energy production, as well as delaying for two months the automatic spending cuts. While it also allowed Social Security payroll taxes to rise by 2 percentage points — thereby raising the tax burden on poor and middle class people — and did not increase the federal debt ceiling or address entitlement spending, the last-minute compromise does mean that the US tech market no longer has to worry, for now, about big increases in taxes and cuts in spending pushing the US economy into recession.

Read more

The US Tech Market Outlook After The Election: Four Questions Awaiting Answers

The 2012 US election is now over, and the results were about what I expected based on the polls going in: Barack Obama reelected President (although with a wider margin of victory in the popular vote and electoral college than many had predicted); the Democrats retaining control of the Senate, with a slightly higher majority; and the Republicans holding their majority in the House. The blog I wrote in September on "What An Obama Reelection Would Mean For The US Tech Market Outlook" now becomes the one to focus on. With the balance of political power in Washington now settled for the next two years, those of us who track the tech market will now be awaiting answers to four key post-election questions:

Read more

Categories:

Lessons From Hurricane Sandy

Like many others in the New York region, I am writing this in a cold, mostly power-less house, without landline telephone or Internet connections. Thanks to the foresight and generosity of a neighbor with a generator, we have an extension cord that is powering the refrigerator and one light, plus charging of various iPhones, iPads, and PCs. With a gas range for cooking and intact house, we are basically engaged in high-class camping, with both the pleasures and discomforts that entails. 

Right now, my only electronic connection to the outside world is through my iPhone, which did provide email through the storm, though cell voice service went missing for 36 hours after Sandy hit. I am writing this on my laptop, which doesn’t have Internet access, because I refuse to write an article like this on the keypad of an iPhone. (Yes, I know, I should have bought the iPad with 3G, but do I really need to spend $600 just for that?) Once I get this written, I will head to the nearby Starbucks and use their Wi-Fi to post this blog. 

What this experience has reinforced for me are four lessons:

Read more

Categories:

Tech Buying Is On Hold Until After The Election

We are just at the start of the earnings releases on Q3 2012 vendor revenues and a week and a half from the first release of US GDP data on business technology investment in the quarter, but it is already clear that Q3 2012 will be a weak one in terms of tech market growth. IBM reported a 5% revenue decline its third quarter; Microsoft had an 8% decline in total revenues, and we estimate a 5% decline in its sales to business; and Tibco had a 3% drop in its revenues for its quarter ending August 31, 2012. Oracle's software revenues for its quarter for the same period rose by 2% (with license revenues down 1%); and Accenture saw its revenues for the same period rise by just 2%. While there have been some positives — Tata Consultancy Systems' revenues were up by 13%, and Adobe had a 7% increase in its revenues — weakness has been the dominant story so far.

Is this the start of a downward trend in the tech market? I don't think so. Yes, there continues to be weakness in Europe, with most countries there in or close to recession. But the US economy seems to be gathering strength, with consumer confidence on the rise, retail sales increasing, and the housing sector improving. China, which had been showing signs of slowing growth, also appears to be picking up. So, the economic fundamentals are pointing toward an improving tech sector in Q4 2012 and 2013.  

Read more

Categories:

Is the US Bureau of Economic Analysis Undermeasuring the Tech Economy?

 

When I do my US tech market sizing and forecasting, I start with the data on business investment in computer equipment, communications equipment, and software in the quarterly National Accounts of the US Bureau of Economic Analysis (BEA).  As Forrester’s recently published report on the US tech market noted (see September 28, 2012, "US Tech Market Outlook Dims For 2012 To 2013 -- US Tech Market Spending Will Maintain A Mediocre 4% to 5% Pace"), the BEA in July revised the historic data on these categories of business investment going back to 2009, significantly reducing the size of tech investment in this period and lowering the growth rate of business tech investment to a pace not appreciably faster than the growth rate in the US economy.

While I adjusted my tech market sizings and forecasts to these lower numbers from the BEA, I have been wondering whether the BEA in their data collection is missing key segments of new technology, and thus understating the level of tech buying that is actually going on.  We have no good way of answering this question since the BEA has not publicly indicated that there have been any changes in data sources and aggregation methods that would signs of undermeasurement.  Still, here are the questions I would ask BEA if I had the chance.

Read more

US Tech Market Growth Slows As Election And Political Uncertainties Dampen Economic Growth And Tech Buying

Earlier in 2012, I was fairly bullish about the US tech market, expecting growth of 7% to 7.5% for the near depending on whether or not telecommunications services was included (see April 24, 2012, "US Tech Market Outlook For 2012 And 2013 -- Improving Economic Prospects Create Upside Potential") .  But economic growth has been weaker than I assumed, coming in at 1.3% in Q2 2012 compared to my expectation that real GDP would grow by around 2-1/2%. In addition, the US Bureau of Economic Analysis revised downward its estimates for growth in business investment in computer equipment, communications equipment, and software.  These revisions eliminated the evidence for my thesis that the US was in a new cycle of tech innovation and investment that was causing tech investment to grow twice as fast as the economy.  Instead, the revised data showed that tech investment was growing at about the same rate as the US economy in 2010 and 2011, not faster as earlier data had shown.  Tech innovation is clearly going on, but at least in the official data tech investment has not responded in kind.  So, with nominal GDP growth for 2012 shaping up to be about 4%, our tech market growth outlook for 2012 in our latest US tech market forecast report (see September 28, 2012, "US Tech Market Outlook Dims For 2012 And 2013") is about the same, that is to say, in the 4.5% to 5% range.  

Read more

What An Obama Reelection Would Mean For The US Tech Market Outlook

 

In a separate blog post ("What A Romney Presidency Would Mean For the US Tech Market Outlook"), I analyze what I think would be the likely impact on the US tech market if Mitt Romney is elected President in November. In this post, I provide a similar analysis of the US tech market should Barack Obama be re-elected. As with my analysis of a Romney election, I start with the premise that elections only slightly move the needle on the general course and direction of tech market growth, at most shifting growth rates up or down one- to two-percentage points.

In that blog post, I pointed out that there are only minor differences between the Republican and Democratic platforms in terms of policies directly impacting the tech industry, and almost no differences in policy areas not addressed in the platforms, such as tech investment tax incentives.  That means that the biggest impact of an Obama election on the tech sector will come from what that would mean in terms of tech demand – that is, how the economy would grow under an Obama Administration, and how government spending on tech might change.   

Like the Republican platform, the Democratic platform is vague or ambiguous on many critical details of economic policy, especially in explaining how it would address federal budget deficits and entitlements spending. As the incumbent, Obama does have a track record, which we can use to make some predictions about his administration’s likely policies if he is re-elected. Here are the key tenets:

·         Support for additional fiscal and monetary stimulus to boost economic growth.

Read more

What A Romney Presidency Would Mean For The US Tech Market Outlook

 

With the US presidential election race entering the two-month sprint to election day, I think it is useful to speculate on what a Romney administration would mean for the US tech market (in another blog post, I analyze how a second Obama Administration would affect the tech market -- see "What An Obama Reelection Would Mean For the US Tech Market Outlook.")

To start, we should remember that US elections don’t have much of an effect on tech spending and purchases. Businesses and governments make tech buying decisions based on their own needs and funding resources, which elections affect only around the margins. I don’t expect this election to diverge from this historic pattern. Still, marginal tech decisions can mean the difference between a tech market that grows by 3% to 4% or one that grows at rates of 5% to 6%.

Read more

Global Tech Market Slows In 2012

With two thirds of 2012 completed, it has become clear that the global tech market is not going to grow as fast this year as we had expected in January.  Back then, we predicted that business and government purchases of information technology would grow by 5.4% in 2012 when measured in US dollars.  In our latest forecast (see September 10, 2012, Global Tech Market Outlook 2012 To 2013: Economic Weakness Will Slow, But Not, Stop Growth), we now expect growth of 1.3%.  Much of this slowdown is due to greater-than-expected strength in the US dollar against other major currencies.  Measured in local currencies to eliminate currency fluctuations, we project 2012 growth will be better at 3.6%.  Still, this too is lower than our January prediction of 5.3%, which is the result of slower economic growth in the US, Europe, China, and India.

I want to point out that, apart from the currency effects, the slowdown is concentrated in one geography  – Europe – and one tech product category – communications equipment.  In local currency terms, the tech markets of the US and Asia Pacific will grow by 4% to 5%, while emerging markets in Latin America and Eastern Europe, Middle East, and Africa will expand by over 8%.  The weak spot will be Western and Central Europe, where the tech market will shrink by 2.5%.  On a similar basis, software, IT consulting and systems integration services, and IT outsourcing will grow by 4% to5% or more, and computer equipment by almost 3%.  But communications equipment purchases will decline by almost 1%.

Read more

The European Tech Market Will Grow By 1.2% In 2012 And 3.1% In 2013 – If The Euro Does Not Fall Apart

Making a tech market forecast always runs the risk of being overtaken by subsequent events.  This risk is particularly acute in Europe in June 2012, when the whole euro project hangs on the brink of potential failure.  Yet with Forrester's European CIO Forum conference occurring this week in Paris, we had to make a call on the outlook for the European tech market, rather than wait until the outcome becomes a clear. 

So, here is my assumption: the European Union and the European Central Bank will patch together a set of policies that will keep Greece in the euro, provide financing to keep Ireland, Italy, Portugal, and Spain functioning as economic reforms take hold, and offer enough stimulus to prevent something worse than the current, mild recession.  As such, in our European tech market report published today (European Information And Communications Technology Market 2012 To 2013 -- Spending Growth Comes To A Halt As Europe Slides Into Recession), Forrester is predicting that purchases of information and communications technologies (ICT) by European business and governments will grow by a feeble but still positive 1.2% in 2012 in euros, and a weak but slightly better growth of 3.1%.  Let us hope that the alternative of a euro break up, a subsequent deep recession, and a collapse of tech buying similar to that in 2009 does not make this one of the shortest lived predictions we have made.

The details of our European tech market outlook are as follows:

Read more