The Tech Recovery of 2010 Is Underway

As I predicted in January 2010 (see January 11, 2010, "US and Global IT Market Outlook: Q4 2009"), a tech recovery has started in the US and around the world.  In my updated IT market forecast (see April 8, 2010, "US and Global IT Market Outlook: Q1 2010"), I point out that IT market indicators from Q4 2009 showed an end to declines, setting the stage for stronger growth in 2010.  Since IT market trends are playing out as I expected, I have made only modest changes to my 2010 IT market forecasts.  I now expect the US IT market to grow by 8.4%, a bit higher than my earlier forecast, because of better-than-expected performance in communications equipment.  My forecast for the global IT market in US dollars is a bit lower at 7.7%, with the unexpected strength in the US dollar (due to the weaker Euro after the Greek debt crisis) dampening dollar-denominated growth.  I continue to see computer equipment and software as the strongest product categories in 2010, with PCs, peripherals, and storage equipment leading the computer category and operating system software and applications setting the pace for software. Communications equipment purchases are looking up, especially for enterprise and SMB buying.  IT services will lag a bit, with systems integration project work waiting for licensed software purchases to rise. 

In this report, I provide our first look at 2010 IT purchases on an industry basis in the US.  Confirming past research, the largest US industry market for tech products and services is the professional services industry ($103 billion), followed by financial services ($81 billion), and government ($71 billion).  In terms of 2010 growth prospects, US manufacturers, financial services firms, utilities, and health care will see the strongest growth in 2010. 

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Launching A New Blog On Tech Economics

With Forrester’s new blogging platform in place, I have the opportunity to launch a series of blogs about tech economics.  What do I mean by tech economics?  To me, tech economics first means how the larger economy and the tech sector interact.  I am interested both in how economic conditions impact the demand for technology goods and services and how business and government purchases of these tech goods and services affect the economy as a whole and the industries and firms in the economy.  Second, tech economics is about the revenue of tech vendors, both what they are reporting in the present and past and what we expect those revenues will be based on future purchases by their business and government customers.


My published research on the US and global IT market outlook, industry, regional, and country IT purchase trends, big trends like Smart Computing, and the ePurchasing software market (which I also cover) will continue to be my platform for addressing tech economics.  However, I want to use this blog to talk about four focused aspects of the tech market: 1) tech data sources; 2) tech industry definitions; 3) tech market developments; and 4) tech market dynamics.   Let’s call these the 4Ds of tech economics, and each will have its own strand of comments and observations.


D1: Tech data sources will be of most use to the data geeks like me in tech vendors.  These are folks who use my numbers in their own forecasts of the market for their firm and its products.  These blogs will talk about the data sources that I use in building my tech market sizing and forecasts, issues and questions about these data sources, and how the data geeks can leverage them.  I will share some (but not all!) of our secret sauce for our forecasts, and I hope you will share some of yours so we can all get better.

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Q4 2009 IT Market Data As We Expected Shows End of Tech Downturn

The first reports on the IT market in Q4 2009 are now in, and they are in line with our prediction that the tech market recession ended in that quarter (see US And Global IT Market Outlook: Q4 2009). Overall, the tech market in Q4 2009 was more or less flat with the same quarter the year before – an improvement from prior quarter when growth was negative, and evidence that the 2010 tech market will post positive growth. 

  • The US economy was stronger than expected, by 5.7% real GDP is an aberration.  The US Department of Commerce released preliminary data on Q4 2009 economic growth, and the results was a surprisingly strong 5.7% in real GDP, 6.4% in nominal GDP from the previous quarter (on a seasonally adjusted annualized basis).  However, about two percentage points of that growth was due to inventory re-stocking, which will not be repeated in future quarters.  And based on prior GDP reports, this growth rate will probably be revised down as new data comes in.  (In Q3 2009, the growth rate in real GDP started at 3.5%, but ended up revised down to 2.2%.)  Still, this report confirms that the US recession is over, and slower by steady growth is likely for the rest of 2010.
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Global Tech Recovery Will Drive US IT Market Growth Of 6.6% And 8.2% Globally (In Dollars) In 2010

2009 was a miserable year for tech vendors, especially for sellers of capital equipment like PCs, servers, routers, and licensed software, and for systems integrators who helped implement that software.   2010 will be a much better year, especially for these very same vendors.   We’re not talking boom yet, so we are not predicting double-digit growth rates across the tech market (though some categories will see those kinds of growth).  But, as our latest tech market report shows (, we do think there will be a solid tech recovery in 2010, with growth rates in the high single digits.


Given that other IT advisory firms are predicting that tech markets will see growth of 3% to 4% in 2010, why are we so (relatively) bullish with our predictions of 6.6% growth in the US tech market, and 8.2% growth in the global tech market (when measured in US dollars)?  Three reasons:

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Smart Computing Will Create Growth Opportunities -- and Challenges -- for IT Vendors

Since 2004, I have been arguing in my research that the tech market would enter a new cycle of innovation and growth starting in 2008. This thesis was based on my review of the US tech market since the 1950s, which showed a pattern of eight-to-ten year cycles of strong growth in tech purchases, followed by eight years of modest growth. This pattern had repeated three times, first with the introduction of mainframe computers in the late 1950s and 1960s, then with the arrival of personal computers in the 1970s and 1980s, and then with ERP software, client-server systems, and the Internet in the period from 1992 to 2000. Based on this pattern, I predicted that the tech market (at least in the US) would grow at about the same rate as the overall economy from 2004 to 2007 as business "digested" that third wave of technology, then decline in 2007 or 2008 due to a recession in that period ("IT Spending Outlook: 2004 To 2008 And Beyond -- Waiting For The Next Big Thing":,7211,35063,00.html; "Expect A Tech Slowdown Before The Next Boom -- Forrester's Long-Term IT Spending Forecast For The US, 2005-2010":,7211,37816,00.html). While not all aspects of these predictions have come true, overall I believe they were a generally accurate forecast of what happened in the tech market from 2004 to 2008.

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As Expected, Data on Q3 2009 US IT Market Showing Continued Decline, But With Signs of Nearing Bottom

This morning, the US Department of Commerce’s Bureau of Economic Analysis released preliminary data on the US Gross Domestic Product in Q 3 2009, which included data on business investment in computer equipment, software, and other IT equipment (principally communications equipment).  The headline news is the 3.5% increase in real GDP in the US from Q2 2009 to Q3 2009 (at a seasonally adjusted annual rate).  That is the first positive growth in US real GDP since Q2 2008, and the strongest since 2007.  Some special factors, such as the cash-for-clunkers program in autos and the tax incentives for first time home buyers, contributed to this strong growth, so growth in coming quarters will be closer to 2% since these incentives have expired or are likely to do so.  Still, the economic data does suggest that the recession is over. 

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Forrester's Updated IT Market Forecast Shows Worse 2009, But Still Positive Outlook for 2010

In our latest US and Global IT market forecast (, Forrester stays steady with our June 2009 projections that the US tech market will start to recover from the downturn in Q4 2009, with the global tech market improving in 2010. However, the 2009 growth rate now shows a bigger decline than our earlier forecasts, for two reasons. First, cutbacks in capital investment, which had earlier been confined to computer and communications equipment, spread in the first half of 2009 to licensed software, causing big declines in this category of tech purchases. Second, upward revisions to US IT investment data in 2007 and 2008 by the US Department of Commerce raised the base periods for measuring 2009 growth, making the 2009 declines even greater than before. Thus, we now project a -9.3% decline in US tech purchases in 2009, compared to a 5.1% decline in our June forecast. But those revisions confirmed our position that a tech boom was starting to take shape in 2008, before being rudely interrupted by the September financial. The weak results in early 2009 also mean that the market will hit bottom sooner, setting a low base for year-over-year growth starting in Q4 2009 and into 2010.

The story is the same for the global outlook. 2009 now looks worse than our previous forecasts, but 2010 still looks like a year of solid recovery. One factor that will help reported vendor results (especially for US vendors) is the decline in the value of the US dollar against major currencies since March of 2009. The value of the dollar is now about where it was a year ago, so vendors will be able to report Q4 2009 revenues in US dollars that will be better than their currency-adjusted numbers.

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IBM Moves Ahead In Smart Computing, But Still Has Ways To Go

IBM threw a big event in New York City on Thursday, October 1, and Friday, October 2, to publicize its Smarter Cities initiative, part of its Smarter Planet marketing message. The event featured an impressive list of politicians (Mayor Bloomberg, NY Governor Patterson, governors from Vermont and North Carolina) and CEOs (CEOs from ABB, Verizon, American Electric Power, etc.). I was part of the crowd of hundreds of attendees and IBMers on Friday, and my colleague Doug Washburn attended on Thursday.

It would be easy to dismiss this as part of hype machinery that IBM is running to build awareness of and create customers for its Smarter Planet initiative and the emerging offerings that it is creating under that rubric. But I think there is more going on here. What IBM is really doing is creating a vision - or more precisely, half a dozen visions - of how a new generation of technology can help address some critical challenges facing the planet. Visions of course can easily become hype. But as several speakers noted, visions are also a necessary first step in any transformation process, building awareness of what can be different at the end that will inspire people to start the journey. And IBM to its credit put concrete examples behind the proposals.

Here is what IBM is doing right:

  • Focusing on key social and economic problems facing many countries around the world. Cities and national governments face challenges of providing healthcare more efficiently, improving the quality and delivery of education, managing greater and greater volumes of people travel and goods transportation, providing public safety and security in the face of increased threats of terrorism and persistence of crime, and encouraging energy conservation and alternative energies to counter global warming. These are the problems that IBM's Smarter Cities initiative focused on.
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