A new report by Gartner showing that software spending will increase worldwide next year indicates there may be truth to the general belief that the technology market has hit bottom.
According to results of a Gartner survey of about 1,000 IT professionals worldwide conducted in April and May, 28% of companies in North America expected to increase their software budgets in 2010, while 25% of companies in Europe, Middle East and Africa (EMEA) and 30% in the Asia/Pacific region expected the same.
“We're at a turning point,” said Joanne Correia, managing vice president at Gartner and the lead analyst on the survey. She said the survey was conducted during those months because that was about the six-month point after the global economy went into crisis and companies had some time to plan their way through it.
“Everybody has been through six months of 'What am I going to do?'” she said. “We wanted to get a good idea of what their tone was going to be.”
Many second-quarter financial results for major sellers of software such as Microsoft Corp. and IBM showed a decline in year-over-year revenue in that segment. However, companies in general reported that though they were not out of the woods financially yet, there would be growth over the next year.
Correia said Gartner's report supports an overall cautiously optimistic tone. While it appears that companies' software budgets have bottomed out and are on the rise, she warned people not to expect anything dramatic. “We're crawling out of the hole,” Correia said.
Despite this bit of good news, software spending in general is expected to be on the decline in North America, though other geographies are expecting a slight bump, according to the report.
Software spending in North America is expected to decline 2.06%nt in 2010, with EMEA showing slight positive growth at 0.45 percent, Gartner reported.
The U.S. in particular “is a little more negative than the rest of the world,” Correia noted. However, that market “has bottomed out” and companies will start adding money to IT budgets.
Certain economic factors in the U.S. have made it a more challenging environment for IT growth, such as the collapse of its financial and manufacturing markets, Correia said. The financial industry represents about 21% of software spending in the U.S., and the manufacturing industry represents 15% to 18%, she said.
Mature markets in general will show slower growth next year, which is also why growth in the region that includes Europe also will continue to be sluggish, she added.
Software budgets in Latin America and Asia/Pacific should fare better, however, with a rise of 2.54% in the former region and a rise of 4.34% in the latter, according to the report.
Emerging markets like Asia and Central America — where countries like China, India and Brazil are working on modernizing their IT infrastructure — will have more growth because of this development, Correia said. Gartner in particular polled IT professionals in China and India for the survey, which could account for why it shows a fair amount of growth in Asia, she added.