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May 18, 2009

U.S. IT Spending to Dip Slightly

Total U.S. information technology budgets will decline from $761 billion in 2008 to $750 billion in 2009, a decrease of two percent, says Forrester (News - Alert) Research analyst by Andrew H. Bartels. The IT budget on a cash-outlay basis includes the IT purchases data and adds IT staff salary and benefits. 

Purchases of computer equipment, communications equipment, and IT consulting and systems integration services have been falling, software purchases will be flat but IT outsourcing will grow slightly, he says.
IT staff costs will be the single largest IT budget component in 2009 at 36 percent, followed by software at 22 percent and computer hardware at 13 percent.
The "big news," says Bartels, is that "SMBs as a group will cut their IT budgetary spending more in 2009 than U.S. enterprises will," he says. It appears SMBs have gotten more conservative since the fourth quarter, when smaller entities suggested they would maintain spending at levels more in line with what they spent in 2008.
"However, because of higher rates of failure among SMBs and greater strain on their financial resources in this recession, we think that, in reality, SMBs will make bigger cuts in their IT budgets in 2009," says Bartels.
SMB IT spending will shrink by two percent, while enterprises will decrease by 1.1 percent. Normally, SMBs tend to be more recession-resistant than large enterprises because they are concentrated in services sectors that are less vulnerable to downturns than the goods-producing industries, says Bartels.
However, this recession started in the housing sector, and the bursting of the housing bubble has hurt many SMBs that support housing and home buying, from construction companies to real estate agents, property appraisers and lawyers, mortgage brokers, architects, landscape designers, and other professional services firms, he says.
Second, this recession has seen sharp cutbacks in bank lending, which hurt SMBs that have few alternative sources of financing. The combination of these forces has hurt SMBs more than enterprises this time.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Jessica Kostek

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