Analysts: Global tech spending to retreat in 2009

NEW YORK -- Technology companies face a bumpy ride in 2009.

Global business and government spending on computer, software and communications products and consulting services is expected to decline 3% this year, Forrester Research said in a report due out Tuesday.

This would mark the first decline since 2002, when information-technology spending dropped 6% after falling the same amount in 2001.

However, this downturn is not expected to last as long. Forrester projects tech spending to recover next year, rising as much as 9% in 2010.

In addition to the recession, the strengthening dollar is also to blame for the drop-off Forrester sees this year. Just as the weak U.S. currency boosted the growth rate of technology purchases made in dollars in 2008, the now-stronger dollar will hurt it in 2009, according to Forrester. Western Europe's technology spending rate is a good illustration of the currency discrepancy: measured in dollars, tech purchases in the region will be down 7% in 2009. Tech purchases in euros will be up 1%.

To neutralize the effect of currency changes, Forrester also projected the global technology market using a "basket" of local currencies, weighed for how big a share of the market each region holds. Using this measure, technology purchases are expected to have grown by 4% in 2008 and post growth of 3% in 2009, and 6% in 2010.

Certain aspects of technology will fare better. For example, Forrester expects software purchases to total $388 billion this year, the same as in 2008. But computer equipment purchases — which includes personal computers, servers and storage devices — are expected to decline 4%, to $434 billion. That's because businesses often see software as a moneysaving tool, while buying new computer equipment is something that can be put off until more prosperous times.

There are other trends at play, too, such as an ongoing decline in the server market, independent of the economy, said Forrester analyst Andrew Bartels. More companies are embracing server virtualization, a technology that allows one server to function as multiple machines, saving companies money and energy. Businesses are also realizing that their employees can use BlackBerrys, iPhones and small laptops known as netbooks for work. So, the analyst said, rather than issuing workers both a PC and a BlackBerry, companies might stick with just a BlackBerry.