The credit crunch is set to wipe up to US$170 billion in global IT sales that will hurt Intel, Microsoft and other major technology companies, according to a Bloomberg report. A big freeze on both spending and credit will blanket the industry as analysts predict one of the worst ever downturns for IT.
It would be the first major decline in the $3.41 trillion IT market since 2001 dot-com bubble burst.
Bloomberg quotes Jane Snorek, an analyst at First American Funds, as estimating corporate spending on computers, software and communications equipment will plunge by as much as 5 percent next year.
Separately, research firm Gartner estimates IT spending growth will slow to 2.3 percent next year, down from an earlier project 5.8 percent.
“Business kind of stopped dead in the last two weeks,” said Snorek. “People are pushing off orders and saying, ‘I have no idea if we’re going to have a global meltdown, so I’m not going to buy anything right now.’ “
She notes that the financial services sector accounts for a quarter of technology outlays and predicts that now there are fewer banks, the hardware, software and services sectors are headed for a big slump.
Gartner is taking a more cautionary approach, predicting the industry won’t see the kind of dramatic reductions that occurred during the dot.com bust when budgets were slashed from mid double-digit growth to low single-digit growth.
It says that what the IT industry needs most in the current crisis is agile leadership that can guide companies through simultaneous cost control and expansion at the same time.
According to research firm Forrester, more than 40 percent of companies have already reduced their technology budgets and delayed contract decisions.