The US IT services market will return to its pre-downturn growth rate of 5% in 2010, going by the strong IT hardware demand seen in the last two quarters, Forrester Research has predicted.
The $85 billion US IT services market had shrunk 5% in 2009, affecting the growth rate of the $40 billion Indian IT and outsourcing industry.
“The cutbacks in tech purchases were in many cases driven by fear. Fear that the economy was headed toward a multiyear recession… and fear that firms would not be able to borrow from banks or the credit market if they needed, resulting in the drive to hoard cash and slash capital investment… As fears ease and prices rebound, the pent-up demand in those industries for IT goods and services will bounce back in 2010,” Forrester said in its report on the US IT industry last week.
The strongest segment in IT services will continue to be IT consulting, which grew even in 2009 as companies struggled to cut IT costs, followed by hardware support and system integration.
IT outsourcing, which grew from $75 billion to $76 billion in 2009, will hit $79 billion in 2010, Forrester analyst Andrew Bartels concluded.
However, Forrester warned that recovery in the system integration business will start only by around Q3 2010, despite strong sales expected in software in the first half.
The US software market too will shed its recession colours in 2010, going by the strong hardware sales. The industry, which had shrunk 10% in 2009, will grow more than 10% this year to hit a record $194 billion. Nearly all US software firms have offshore development centres in India, employing tens of thousands.
IT spending by US financial companies, the primary clients of Indian service providers, will jump 11.4% in 2010 to hit $95 billion, after declining more than 8% last year.
Meanwhile, technology research firm Gartner came out with similar projections for the global market. It said worldwide IT spending — software, hardware, IT services and telecom — will grow 5.3% in 2010 to touch $3.4 trillion, and grow 4.2% in 2011.
“Robust consumer spending on mobile PCs will drive hardware spending in 2010. Enterprise hardware spending will grow again in 2010, but it will remain below its 2008 level through 2014,” the agency said.
It identified web conferencing, team collaboration and enterprise content management as segments that would see double digit growth rates in the coming four years.
Gartner also forecast a 5.7% growth for the IT services segment, pegging it at $821 billion in 2010.