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Tech spending set to plunge

Open source should be the big winner in the tech spending slowdown.

In what should be a boon to commercial open-source software vendors, the Wall Street Journal is reporting that tech spending is set for a big slowdown in 2008. Just as a housing and credit crunch should lead to more prudent consumer spending, so, too, should economic malaise at the corporate level lead to more intelligent IT spending.

In other words, less silly spending on licensed shelfware and more savvy spending on real value: open source and SaaS that focus on actual service, not licenses. Proprietary software's loss can be open source's gain:

Last week, IDC cut its 2008 projection for world-wide tech-spending growth to between 5.5% and 6%, down from a previous forecast of 6.6% and from this year's expected growth of 6.9%.

Much of the reduction in growth is due to a U.S. slowdown. Forrester Research says it predicts U.S. tech-spending growth of 5.2% for 2008, down from a previous 2008 forecast of 6.4% and from this year's expected 5.7% growth.

Research firm Gartner says it expects 2008 U.S. tech-spending growth of 5.7%, down from 6.1% this year. Tech-spending growth in other locales, particularly emerging markets such as India and China, is expected to be more robust....

Slower growth in tech spending won't cripple the economy -- tech makes up just 7% to 8% of the U.S. economy, according to Sanford C. Bernstein & Co. -- but it does mean tech growth may be confined to selective pockets next year, says Sarah Friar, an analyst at Goldman. She expects cautious information chiefs to turn their IT spending to projects that will help them reduce costs. Virtualization -- a technology that makes the back-office computers that send emails and process data more efficiently -- and tech outsourcing services, for instance, are likely to benefit, she says.

Or open source. Now is a great time for open source to prove its mettle. As CIOs look to rein in costs after the many years of plenty, they'll be taking a much closer look at software vendors who provide strong value without artificial lock-in.