Happy Days Are Here Again

By TMCnet Special Guest
Brian Farrar, Founder and Partner of Maven Wave Partners
  |  June 04, 2012

This article originally appeared in the June 2012 issue of INTERNET TELEPHONY.

Skeptics among us have long waited for a definitive death knell for the remnants of the Great Recession. Absolute confidence in a return to growth has eluded doom-and-gloomers as fears of double dips, continuing problems in the Euro zone, and a generally skittish view of the world have lingered and elicited continuous doubt.

But now the wait is over, for those of us who more often see the glass half empty than half full.  In the world of IT, we’ve finally recorded several successive quarters of growth since the financial crisis of 2008 ended in the fourth quarter of 2010. Dozens of analyses completed over the last few months – not to mention the latest fourth quarter 2011 update to the Maven Wave Partners study on corporate spending on hardware, software and the IT workforce – confirm that we’re on a growth track.

The forecast is very rosy indeed, and much of that can be attributed to the cloud.

The Silver Lining

Our MIT (News - Alert) Index (a bellwether measure of aggregate spending on information technology) just released on April 18 was up as we predicted, but outpaced our projections by more than six percent. This acceration was driven largely by stronger than expected hardware sales and more rapid increases in hiring than anticipated.

Our previous model suggested that the fourth quarter 2011 would be a somewhat weaker quarter, as companies continued to digest the substantial increase in IT investment made earlier in 2011. We projected that the MIT would step back roughly three to four percent in the fourth quarter of 2011.

That weakness did not manifest itself. Now that actual numbers for the fourth quarter of 2011 are in, we happily see that IT spending maintained its strength, remaining essentially flat from the previous quarter, but outpacing our forecast by roughly 3.8 percent. The MIT rose to 142.7 in the fourth quarter of 2011, meeting our forecast for the end of 2012 exactly one full year early. 

How do we account for the increased spending on IT? The way we see it, this is just the tip of the iceberg as enterprises begin to take advantage of the benefits and efficiencies of cloud computing. 

After refraining from any significant upgrades and living with legacy systems for the last three to five years, companies are now ready to spend. But they need to spend wisely, and are therefore turning to cloud computing solutions. That is, in our opinion, the main reason why the MIT Index reached the projected year-end 2012 level one year early, in the fourth quarter of 2011.

Fairy Tale or Fact?

As a result, we’ve revised our forecast in the belief that IT spending will continue to expand as more enterprises adopt cloud computing. We believe the MIT will increase by between 35 percent and 40 percent to an all time high of 194.5 by the end of 2015. As we have noted in each of the several past quarters, the market has outperformed our model by an average of 5 percent. 

Therefore, we have now revised our forecast upward for 2012 up from 142.6 to 154.7 – an increase of more than eight percent. The revised positive projection syncs with our recent experience and conversations with clients, competitors and vendors in the market.  

All of this is good news for our industry. The IT spending squeeze is officially over. The glass-is-half-empty contingent may still see another crisis looming around the corner, but the facts all seemingly support our thesis that the best is yet to come.

Edited by Braden Becker