January 4, 2007

by Richard Waters

Tech spending in 2007: the cycle turns?

A rebound in spending on IT by corporations and governments, while not back to boom-time levels, has provided a solid foundation for the technology industry over the past three years. Will 2007 be the year things slow down again?

Here are some straws in the wind from recent global forecasts:

                                           2006    2007

Forrester Research (IT spending)           8 pc      6 pc

Forrester (External IT purchases)            8 pc      5 pc

IDC (IT spending)                                       n/a       6.3 pc

Goldman Sachs (IT spending)                 6-7 pc    “probably down"

Sanford C Bernstein (CFO survey)           5.2       4.7 pc

Gartner (spending by big companies)    n/a       2.8 pc

The danger, as IDC points out, is that falling profit growth in the US, along with a harder economic landing, could make current expectations look too optimistic. That would not mean a return to the dark days of 2001 and 2002, but it would certainly be a far less hospitable environment for technology investors - particularly given the current high valuations on tech stocks.

January 4th, 2007 in Uncategorised | Permalink

2 Responses to “Tech spending in 2007: the cycle turns?”

Comments

1. High interest rates increases the cost of capital and this puts many businesses in a difficult position. The time is right to think of technology to optimize all that can be optimized and that has been neglected for the last few years. A first obvious example can be found in working capital requirement optimization. Information services to track, map and decrease the capital frozen into inventory will be seen as the solution to the pains of many SMEs and even large caps.

   Additionally, high commodity prices will drive nations and companies to increase the production efficiency. The first signals of this trend being the hybrid cars fashion and carbon credit trading.

   I therefore believe that the technology sector will grow, but I am talking about a specific part of the technology sector: B2B technology, or technology to big corporates. Hence, I do not expect big evolutions in the retail technology like the one we saw in mobile phones in the 90’s.

   Posted by: Etienne | January 5th, 2007 at 12:19 pm | Report this comment
   

2. Richard

   Thanks for the numbers.

   Those 2006 figures — is it possible to clarify whether they are predictions from 12 months ago, or the analysts’ current verdict on what was achieved in 2006?

   Thanks.

   Peter

   Posted by: Peter Kirwan | January 9th, 2007 at 2:21 pm | Report this comment
   

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