Gathering economic clouds yet to rain on IT buyers

1 Jun 2006

Despite evidence of gathering macroeconomic storm clouds, IT buyers don’t appear threatened by the increasingly jittery economic climate, new research suggests.

According to IDC’s Market Indicator report of the four major components it covered (macroeconomics, vendor revenue expectations, line of business expectations and CIO expectations), macroeconomics was the only component that saw a drop in health.

The macroeconomic portion of the Market Indicator fell from 1075 points in May to 1065 points in June.

“Whether this is an anomaly or a true early warning we don’t know yet,” said John Gantz, IDC’s chief research officer. “Buyer expectations and vendor revenue forecast are aligned, which is good, but late in May stock markets seemed to plummet on a single announcement of downturn in US consumer confidence. The question is: how fragile is the current booming U.S. economy?”

The Buyer Intent indicator went up from 1075 to 1087, continuing a steady rise since its low right after Hurricane Katrina. In other research by IDC, users reported that last year’s major infrastructure upgrade cycle was slowly being replaced by spending on new initiatives. What’s more, budgets seemed more stable than last year when much of the funding was scheduled late in the year and contingent on company financial performance.

“We always worry about wild card events in the greater economy,” said Gantz. “As we tell our analysts, there is a high probability of a low-probability event taking place. Right now this could mean higher oil prices, the falling dollar or dropping consumer confidence. In the future it could mean another rough hurricane season or more Bird Flu.”

For this reason, noted Gantz, IDC tends to be conservative in its forecasts, which rely on thousands of inputs beyond customer sentiment, from IT supplier capacity and technology breakthroughs to channel and pricing dynamics, demographics, regulatory change and myriad other forces on the market. At the moment, IDC’s forecast for IT spending growth in the US over the next 12 months is 5.6pc.

In June’s FutureScan, the actual Buyer Intent indicator rose from 1075 to 1087, while the market indicators fell from 1075 to 1065. FutureScan is a set of market metrics that measure supply and demand in the IT industry based on leading indicators and customer surveys. Values reflect expectations of future growth, with an index value of 1000 indicating zero growth and each additional 10 points representing roughly 1pc of expected growth or contraction.

Buyer Intent reflects market demand for IT products and services over the next 12 months; the Market Indicators number combines input from economic and IT industry revenue forecasts.

By John Kennedy