Heading for a slowdown

As numerous reports have predicted, global tech spending growth appears to be slowing and stagnating in 2008. Research firms IDC, Forrester Research, Goldman Sachs and Gartner have all revised their predictions for global growth in the new year to 5.5-6%, down from this year's expected growth of 6.9%. The firms point fingers at subprime mortgage fears, the shaky U.S. financial sector and rising energy prices for instilling a sense of caution in C-level suites. Most of the reduction in growth is due to a slowdown in the U.S.; tech spending in emerging markets is expected to flourish.

Despite the impending deceleration in IT expenditures, consultants may not be left out to dry. At this point, it seems that hardware and software would be the areas most affected by budget cuts. As such, companies like Cisco, which derive most of their income from producing the equipment that businesses use on their computer networks, would be most hard hit in the coming year. (Cisco is often viewed as a barometer for the IT industry; its revenue tends to reflect trends in IT budgets, since most businesses buy at least something from the company.) Conversely, companies like IBM, which have continued to shift business away from hardware and software and more toward services, may be more sheltered from shifts in spending. IBM's third-quarter revenue rose to $24.12 billion, up 7% from the same quarter last year, and almost all of these gains came from its consulting business (which posted its highest growth rate since 2003). Expect to see more of this shift toward services.

For 2008, most companies plan to spend just enough on IT to keep their systems up to date, and will instead focus their tech budgets on less expensive tech projects that will help reduce costs, such as tech outsourcing services.