It looks like we will be seeing good year for IT spending, building off a good year last year. While Forrester and Gartner do not agree on the rates of growth or the market size, they each have pretty bullish outlooks.
Just this week, Gartner projected Global 2011 IT spending to reach $3.6 Trillion, up 5.1%.
“Gartner expects that among technology segments, telecom will advance the farthest in 2011 at 9.1 percent growth, followed by computer hardware and enterprise software at 7.5 percent IT Services will see only 4.6 percent growth in 2011, Gartner said. “
“ . . . a fundamental enabler of cost reduction and cost optimization, investment in IT is seen increasingly as an important element in business growth strategies,” “As the global economy repairs itself in coming years, we are optimistic about continued healthy spending on IT.”
Forrester took a more aggressive view projecting global spending in IT to grow 7.1% in 2011 versus 7.2% in 2010 and then accelerating in 2012 to 8.7%. Forrester sized the market at a smaller $1.7 Trillion.
“Growth this year is expected across all IT categories, ranging from 6.2% for communications equipment to 7.4% for computer equipment and IT consulting and systems integration services. In terms of actual dollar amounts, software will be the largest category at $430 billion, with computer and communications equipment following at $362 billion and $335 billion, respectively. IT services will be fourth at $309 billion, with systems integration accounting for two-thirds of that amount. Next year will usher in some shifting in IT spending, with software expected to grow the fastest. “
“The regions with the highest growth rates this year will be Eastern Europe, the Middle East and Africa (considered one area), and Latin America. Spending is expected to rise by 9.8% in each region. Asia Pacific will have a growth rate of 8.5% and the U.S. 7.5%, Forrester predicted. The lowest growth rate will be Western and Central Europe, 4%, followed by Canada, 4.9%. All growth is calculated in U.S. dollars. “
As a fund committed to the enterprise technology segment with a particular focus on software, Osage is encouraged by the bullish views. The real questions though, have to do with where the dollars get spent and how aggressively large corporations seek innovation versus status quo when it comes to investing their IT dollars. When one looks at the projections of growth in enterprise software, for example, at 7.5% it appears to go well beyond status quo investing into innovation and we have seen this borne out across our technology portfolio with growth rates averaging well above 20% across the board and well above 50% in a number of portfolio companies based on 2010 performance.
Some other interesting observations can be drawn from this data:
Bottom line – it is a good time to be building a company in enterprise technology if the product meets a real need and is a true innovation versus what is available. The US is a great place to start because market demand will be high. Global expansion in the future may follow a different path than that followed previously. More on this to come in future posts.