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November 10, 2010

Up and down like the Assyrian Empire – now IT spend records an unprecedented decline

The UK, one of the biggest IT markets, is experiencing one of its worst ever periods of decline for the sector and recovery continues to look sluggish. What will do well in this very mixed scenario?

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So now we know. Enterprise IT spending in Europe, the Middle East and Africa (EMEA) is forecast to rebound in 2011 and reach $795.2bn, +1.3% on 2010, according to the latest forecast from industry number crunchers Gartner.

But that good news has to be balanced against two unprecedented years of decline, with 2010 limping in at $784.8bn in 2010. And in Western European terms, the ongoing IT freeze has been even worse – hitting a -3.3% decline. Our part of the world will also experience the slowest long-term growth rate in the areas as a whole, with a compound annual growth rate of 0.8 per cent through 2014.

In other words, the UK, one of the biggest IT markets, is experiencing one of its worst ever periods of decline for the sector and recovery continues to look sluggish. What will do well in this very mixed scenario? Hardware and storage have been highlighted as the area with the brightest outlook up to 2014, according to the research. But this data surely chimes with most of our day to day experiences, that the tap that was opened to gush point in the heady days of ERP, flood in the lotus-eating days of Y2K and then hit tsunami proportions in Dot Com has been so tightly closed nary a drip can make it past the rusty spout.

Will this situation last forever? After all, there have been declines before. For a long time, of course, we didn’t ever experience declines in IT. The 1973 Oil Shock, Thatcher’s early 1980s recession, they all passed us by. The deal was that companies knew, or had been sufficiently propagandised, that computers were The Future, so they tended to leave us alone during macro downturns.

But for every recession, we’ve had amazing boom times, marked by extremely healthy recruitment, massive investment opportunity, the diffusion of computers into more and more markets and parts of business (I think even the construction industry, long a resister of the bits and the bytes, is now co-opted).

Things started to change in the 1990-91 recession. By then, for good or ill, and let’s face it, the jury’s still out on that one, IT was now fused into the rest of the business and in that chilly period of UK Plc’s history, we had to take our lumps with the rest of the organisation.

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So by the time 2008 and the Credit Crunch came, we were just not going to escape any sort of notice. The reason we’ve had a -3.3% drop is because the wider world has had such a squeeze – and I have seen very convincing presentations that say ICT use now matches blip for blip general GDP trends. Maybe you have too.

In any case, the point is that in an economy that has foresworn credit, housing and consumer debt as quick growth engines, ICT can’t expect any rocket boost growth opportunities either.

This is going to be a very different world and market than the one many of us have made our careers in. It’s probably going to be a lot less fun, too. But it’s finally a real world market and we aren’t in any kind of protective, artificial Bubble any more.

We’ve grown up. And being a grown up isn’t always a barrel of laughs, is it?

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