Gartner and UBS provide a mixed view on IT spending

Growth in information technology spending next year is expected to go from a modest uptick to a virtual blip, according to a report released Monday by Gartner Research. Meanwhile UBS Securities predicts a more dire outcome.

IT spending is expected to grow 2.3 percent next year, a figure that's down from earlier projections of 5.8 percent growth, according to Gartner. The lowered forecast comes as the markets have been whacked particularly hard over the past two weeks and the credit market has tightened.

"Developed economies, especially in the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009, the United States and Japan will be flat," Peter Sondergaard, global head of research at Gartner, said in a statement.

And while Gartner expects IT spending will be greatly affected in the fourth quarter as the economic climate has taken a toll in the past two weeks, the research firm does not believe the full year outlook will substantially change for IT spending.

UBS, however, has a different assessment on IT spending. In a research note released Monday, it forecasts a 5 percent to 15 percent drop in IT spending in 2008, over last year.

And here's why:

Two key trends driving spend lower include: 1) revenue pressures, write-offs and cash conservation that are causing financial institutions to look at technology spending for savings as it typically accounts for the largest non-personnel expense on the P&L and 2) people are thinking about buying less yet still being able to do more. Looking out to the December quarter, while the year end is typically the busiest period to close deals with vendors, expectations are that there are not likely to be purchases of any meaningful size in 4Q this year suggesting that the typical Q4 budget flush is unlikely to occur.

And 2009 may not fare any better, with UBS analysts noting while it is difficult to access the year at this point in time, the research firm would not be surprised to see IT spending fall by a similar 5 to 15 percent next year.

Within the hardware sector, UBS expects to see storage demand drop next year, but not to the same degree as servers, which tend to have excess capacity at companies, followed by desktops, which are viewed as purchases that can easily be delayed.

And within the software sector, security software is expected to actually post double-digit gains this year, as well as next.

UBS expects security software spending to rise 10 percent this year, over the previous year and jump to an additional 15 percent increase next year over the current year.

The reasoning relates to the economy and layoffs that are expected to ensue across the corporate landscape.

Companies tend to ramp up on security software during times of layoffs, in a move to prevent soon-to-be ex-employees from walking off with corporate secrets and customer lists. Businesses also tend to ramp up on security software during economic downturns to prevent hackers from taking down their operations, notes UBS.