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The rapid change in macroeconomic conditions continues to impact demand for IT products and services, and a dramatic recovery in 2009 is highly unlikely in spite of the best efforts of various government stimulus initiatives, which should begin to have more effect in the first half of 2010. Businesses remain focused on cost savings and reductions as they attempt to ride out the storm, and consumers are now directly impacted by rising unemployment and job insecurity in addition to the poor availability of credit and tumbling real estate values. Exchange-rate volatility will act as a wild card for the remainder of 2009, having already caused unexpected spikes in import prices and thus impacting various IT markets. Oil prices are expected to stabilize somewhat in the second half of the year, but are already at levels much lower than 18 months ago. The visibility of financial market conditions, meanwhile, remains murky. Government intervention appears to have ensured an avoidance of the worst-case scenarios in the financial industry, but the recovery of the credit markets appears to be gradual at best.
Having said all of that, the underlying drivers for IT demand and proliferation remain strong and largely unchanged since 2008. Businesses and consumers show no signs of questioning the value of technology, in contrast to the recession of 2001–2002. The drive towards modernization and the proliferation of the Internet and mobile devices will continue in emerging geographies, where IT spending is expected to rebound to pre-recession levels by mid 2010 (assuming gradual recovery in global trade and economic growth). Even in mature economies, where the pace of recovery will be more gradual, businesses remain committed to the value of investment in new technology platforms and applications, while consumers remain enthusiastic about innovations such as smart phones and mobile data services. Our research shows that there is no reasonable likelihood of a repeat of the 2001–2004 downturn in IT markets, when businesses and consumers questioned the value of IT investment and prolonged the duration of the IT market slowdown far beyond the actual duration of the economic recession. This current contraction in IT spending, as bad as it is, will prove more short-lived and temporary in nature, related entirely and directly to the duration of the macroeconomic recession and external factors.
Preparing for the imminent recovery in IT investment is therefore as essential as successfully navigating the current downturn. ICT vendors and suppliers that lose mindshare in these markets during the next 12 months will be left behind when the pace of IT spending recovers to double-digit growth rates by the second half of 2010. The recovery in IT spending will be uneven: geographically, by technology sector, and by vertical industry. Understanding the varying drivers for the pace of recovery according to this triangulation of market opportunity (geography, technology, and industry) is therefore essential in order to successfully prioritize short-term investments so as to maximize growth potential in the next two-to-three years. Amid the need to control costs and align business strategy with the radically altered macroeconomic environment of 2009, there is also a responsibility to ensure that this cost effectiveness and damage control does not come at the expense of competitive positioning for the more crucial long-term aim of expanding market share and presence over the recovery period of 2010–2013.
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Overview