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Tuesday, 24 February 2009 09:39

World economic downturn hits vertical market IT spending, but growth in some sectors: Gartner

By Staff Writers

Worldwide vertical market IT spending is projected to total US$2.7 trillion in 2009, a 0.5 percent increase from 2008, with the three largest growth areas in the Asia Pacific region predicted to be communications, transportation, and utilities, according to Gartner.

In its latest vertical market’s survey, Gartner says utilities, healthcare and government are expected to be the strongest-growing segments of the market in 2009.
According to John-David Lovelock, research vice president for Gartner, the utilities industry is forecast to grow the most in 2009 with 2.9 percent growth. “As smart grids and energy supplies are viewed as national and strategic issues in many countries, spending on IT is a necessity,” says Lovelock.

Loverlock says the healthcare industry is expected to post the second-highest increase in 2009 with 2.2 percent growth, while countries in which healthcare is primarily publicly funded will be sheltered from the worst of the economic turmoil, with governments tending to keep healthcare funding at least stable during the worst economic conditions.
"The economic slowdown triggered by the U.S. subprime market crisis, along with fluctuating oil prices and currency exchange rates impacted many industries and countries around the world in IT spending," Lovelock added.

"Internal spending, hardware and system integration in the financial sector were particularly hard-hit in 2008 and will continue suffering through 2009. In contrast, healthcare grew 8.3 percent worldwide in 2008, and utilities grew 7.7 percent."

Gartner says that uncertainty about the depth and duration of the economic slowdown dominated the banking and investment sector in the last quarter of 2008, leading to declines and postponements in IT spending at many large financial services companies, and this was expected to continue in 2009 as worldwide financial services IT spending was forecast to decline 0.7 percent (see Table 1). 

Gartner forecasts that the U.S. financial services sector will be hardest hit, but adds a cautionary note of optimism with its prediction that major IT investments in less-affected countries such as Canada and Mexico and regions such as the Middle East and Africa will minimise the decline in the sector worldwide.

For the Asia Pacific region, Gartner says vertical market IT spending is forecast to grow 2.9 percent in 2009, well ahead of that of the worldwide rate.
“The communications industry posts the highest growth forecast as countries such as India and China continue to spend on third-generation (3G) and next-generation infrastructures. The transportation industry posts the second-highest growth rate as intra Asia demand remains. In total, four industries exceed Asia Pacific's overall CAGR: communications, transportation, utilities and services,” Lovelock says.

However, for Japan, Gartner forecasts the country will “continue to struggle in 2009 with IT spending forecast to decline 0.1 percent.”

Looking at the worldwide situation, Lovelock says the slowdown in economic output (revenue) growth around the world will continue to have a significant, but uneven, impact on IT spending across industries and within industries, as companies continue to adjust cost structures to preserve earnings. “Technology service providers that go to market aware of and aligned to the needs of industry subsectors will perform best," he suggests.

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