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Wall Street Beat: Despite gov't cuts, tech spending overall shows signs of life

Marc Ferranti | Nov. 1, 2013
Though the shutdown and spending cuts by the U.S. government are taking a toll on IT sales this year, market surveys and financial results from the likes of Apple and Facebook this week show some positive signs for tech.

Though the shutdown and spending cuts by the U.S. government are taking a toll on IT sales this year, market surveys and financial results from the likes of Apple and Facebook this week show some positive signs for tech.

"In Forrester's semi-annual US tech market update, we conclude that the Federal budget sequestration, the two-week Federal government shutdown, and the fallout from threats to not raise the Federal debt ceiling have shaved about two percentage points of growth from business and government spending on technology goods and services in 2013," said Forrester chief economist Andrew Bartels in a blog post Sunday.

As a result, Forrester this week reduced its 2013 forecast for U.S. business and government purchases of ICT (information and communications technology) goods and services to 3.9 percent from its 5.7 percent growth forecast earlier this year.

The market research firm sees weakness in computer equipment, IT outsourcing and telecom services. Its revised forecast, however, continues to show strong growth in software, especially, SaaS (software as a service) and analytical and collaboration apps; IT consulting and systems integration services; and communications equipment.

For its part, IDC said this week that big data analytics, content applications and system software drove enterprise software growth in the first half of the year.

IDC said that for the first half of 2013, the worldwide software market grew 5.5 percent year over year, reaching a total market size of US$179 billion, which is close to the company's forecast of 5.7 percent growth for the full year. It's also slightly higher than 5.1 percent growth experienced in the first half of 2012, IDC pointed out, noting that this could be interpreted as a sign of recovery following a period of uncertainty caused by turmoil in the eurozone. IDC expects this moderately positive scenario to continue for several more years.

"Enterprises are seeing new opportunities to drive new and improved products and services by leveraging information. Therefore, it stands to reason that software to manage, access, and share information (structured and unstructured) continues to be a priority for competing in today's economy and a driver of software market growth," said IDC analyst Henry D. Morris in the report.

Tablets are another bright spot for IT. Both IDC and IHS this week issued reports showing strong growth in the market for the mobile devices. Worldwide tablet shipments grew to 47.6 million units in the third quarter of 2013, according to IDC. While slightly below the firm's forecast, the number still represents 7 percent growth over the previous quarter and a whopping 36.7 percent increase growth compared to the third quarter of 2012.

IHS put the sequential quarter increase in tablet shipments at 10 percent.

 

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