Richard Gordon
Research VP
14 years at Gartner
23 years IT industry
Richard Gordon is a research vice president in Gartner Research. He has worldwide responsibility for Gartner's Global IT Market Forecasting. Read Full Bio
by Richard Gordon | January 5, 2012 | Comments Off
Gartner’s U.S. dollar growth forecast for global IT spending in 2012 has been revised downward from 4.6% in the previous quarter to 3.7%. Faltering global economic growth, the eurozone crisis and the impact of Thailand’s floods on hard-disc drive production have taken their toll on the outlook for IT spending this year.
The combination of private-sector deleveraging and public-sector austerity would, on their own, be enough to put the brakes on economic growth, but the lack of political leadership to resolve the fundamental sovereign debt issues, most notably the eurozone crisis, is causing huge uncertainty for businesses and consumers. Although no one can predict how the eurozone crisis will unfold, the scenarios range from bad to very bad to catastrophic, depending on the ability of politicians to craft effective short-term measures to support debt-laden countries and longer-term structural reform. In this environment we expect both businesses and consumers in Europe to be cautious in the coming months about spending on IT products and services.
To make matters worse, during the past quarter, a devastating flood left one-third of Thailand under water. Although the waters are receding, the magnitude of the disaster is only just beginning to strike home. Beyond the human tragedy, there are serious implications for businesses worldwide, particularly with computer and storage purchases. Thailand has been a major hub for hard-drive manufacturing, both for finished goods and components. Gartner’s current estimate is that the supply of hard drives will be reduced by as much as 25% (and possibly more) during the next six to nine months. Given the lead times involved in rebuilding the destroyed manufacturing facilities, the effects of this will continue to ripple throughout 2012, and possibly into 2013.
Large PC OEMs are best-positioned to cushion the effects of the shortages and will see fewer problems than others in the industry. These companies already had contracts in place and quickly responded to the potential disruptions, locking in a portion of the diminished supply in new multiple quarter contracts. However, no company will be immune to the effects on the HDD supply chain, and we have reduced our shipment forecast for PCs, which has impacted the short-term outlook for the hardware sector.
More details on Gartner’s global IT spending forecast can be found at:
www.gartner.com/quarterly-it-forecast
I am also hosting our upcoming Webinar on January 10th which will feature live analyst discussion on the issues and thinking behind the forecast – you can register here:
IT Spending Forecast Webinar, 4Q11 Update
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by Richard Gordon | October 14, 2011 | Comments Off
… at least, not yet.
We have just released the 3Q11 update to Gartner’s Global IT Spending forecast.
This update has been developed against a backdrop of extreme global stock market volatility over the past few weeks, which was prompted by escalating concerns about sovereign debt levels and gloomy economic growth forecasts.
There are increasing concerns about a “double dip” recession, led by Europe and the problems in the Eurozone but pulling in the US as well, with a knock-on effect on growth in the export-driven emerging markets such as China. There is a worry that falling demand for goods and services around the world could impact the outlook for IT Spending.
So, in this uncertain economic environment, are we dramatically downgrading our forecast for IT Spending growth? The short answer is no.
While the causes of the current downgrades to the economic growth outlook are no doubt a hangover from the Global Financial Crisis of 2008 and the subsequent recession, it is important to note that this is NOT 2008!
Today, in 2011, the extent of the sovereign debt problems are understood and quantified even if the politicians are struggling with developing and executing a plan to fix them.
From an Enterprise perspective, company balance sheets are in good shape with many companies are sitting on cash piles. Businesses have remained in cautious budget mode since 2008 so there is less room for cuts now. In fact, CFOs are still expecting to increase technology spending by ~5% for the coming 12 months as technology products and services remain compelling both for cost optimisation and to enable growth strategies. Added to that, commodity prices are declining, bringing costs down and emerging economies are still growing strongly.
However, consumer confidence remains weak (especially in the mature economies of Western Europe and the USA) because of stubbornly high unemployment, a stagnant housing market and barrage of negative media coverage about an impending global economic meltdown – no wonder consumers are cautious about discretionary spending!
So to the updated numbers …
Gartner’s forecast for dollar-valued global IT spending growth has been revised up from 7.1% to 7.6% for 2011 but down 5.0% to 4.6% for 2012. Currency fluctuations again have a significant impact on the top-line current U.S. dollar growth forecast for this year and next; in constant dollar terms, the spending growth forecast across all high-level technology sectors has been trimmed so that, at the level of overall IT, underlying growth has been revised down from 3.6% to 2.9% for 2011 and from 5.0% to 3.9% for 2012. The key driver of this trend is a slowdown in the short term outlook for spending on PCs and Cell Phones especially by consumers.
The bottom line is that, despite the worrying economic situation, we do not expect to see dramatic cuts to enterprise IT budgets in 2011 and 2012. Increased budget scrutiny and conservative business plans are a given in this uncertain macroeconomic climate but IT investment is critical for ongoing business success and non-essential, discretionary spending has, in many cases, already been reduced to a minimum following the Global Financial Crisis of 2008 – 2009. Consumers remain skittish but have proved reluctant to give up completely spending on technology products and services so, while there will no doubt be weakness in demand in the coming quarters, again, we are not expecting to see a severe downturn in consumer discretionary spending.
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by Richard Gordon | June 30, 2011 | Comments Off
Our new global IT spending forecast is out!
The 2Q11 update to Gartner’s global IT spending forecast shows an upward revision to our US dollar growth forecast for 2011 from an AGR of 5.6% last quarter to 7.1% this quarter. However, in constant dollars, i.e. stripping out the effect of exchange rates, we have revised down our growth forecast for 2011 from 4.3% to 3.6%, reflecting the impact of a more challenging short-term global economic growth outlook.
So, not very interesting then? Actually, I think this quarter’s update is very interesting but more because of what didn’t happen rather than what did.
Since last quarter we have been carefully evaluating the impact of the Japan earthquake and tsunami on the global IT industry – both on the supply and demand sides. It is perhaps surprising that we have not seen a more significant impact on our global IT spending forecast for 2011 as a result of that devastating natural disaster.
On the supply side, rather than come out with a knee-jerk reaction in the immediate aftermath, we took a more considered stance and leveraged our in-depth knowledge of the electronics supply chain (right back to silicon wafer production) to check on the availability of critical components. This proved to be the right call as the global supply chain proved to be flexible enough to cope while Japanese manufacturing got back up and running. While there is still the potential for spot shortages of some components in 3Q, which could affect electronics equipment production, we believe that the worst is behind us with no significant impact on Global IT spending likely to be felt.
On the demand side, though, clearly the Japan economy has taken a big hit, which will impact Japanese Business and Consumer spending on IT this year. In local currency, IT spending in Japan is now forecast to decline in 2011 by about 1% … however, we expect to see a bounce-back by the end of the year and into 2012.
For more of the forecast details visit: Gartner’s IT Spending Forecast Web Page
And to hear Gartner analyst insight behind the numbers register for our upcoming Webinar here: IT Spending Forecast, 2Q11 Update Webinar
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by Richard Gordon | March 30, 2011 | Comments Off
Our latest global IT spending forecast is released today and for the first time we’ve included Media Tablets in our spending estimates.
Big deal you might think … what took you so long? And anyway, what difference would a few Media Tablets make to the overall numbers?
The trouble with forecasting the market for new electronics devices is that we need to beware of the hype; for every gadget that achieves market success there are dozens of failures. That said, sometimes it becomes clear early on that a new product is going to live up to expectations of rapid market adoption and that’s the case with Media Tablets, whose time has definitely come.
In our latest forecast update, the 1Q11 iteration, we estimate that about $10B was spent on Media Tablets last year – that’s about 18 million units at an average priced of $550 each. In 2015, we forecast that close to 300 million (!) units will ship with an average price of $250 each – I’ll do the math for you; that’s nearly $80B in annual spending on Media Tablets!
We recently downgraded our PC forecast through 2015, partly because we assume some substitution of PCs by Media Tablets. Nevertheless, spending on PCs and Media Tablets combined is forecast to be about $400B in 2015, with Media Tablets taking a 20% share.
For more detail of our latest global IT spending forecast, including an early assessment of the impact of the recent natural disasters in Japan and the political unrest in the Middle East, check out IT Spending, Worldwide, 1Q11 Update
Most recent IT spending forecasts are always available here: www.gartner.com/quarterly-it-forecast
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by Richard Gordon | January 6, 2011 | Comments Off
… but beware the effect of the weakening US dollar!
Our latest forecast for global IT spending revises up our expectation for US-dollar growth in 2011 from 3.5% to 5.1%. Good news, huh? Not really.
Lest we get over-excited, it’s worth noting that much of this rise is down to currency exchange rate fluctuations that are routinely factored into our forecast. In fact, of the 1.6 percentage point increase in U.S. dollar-denominated IT spending growth, 2.0 percentage points of the gain (i.e. more than all of it, if that makes sense!) comes from U.S. dollar devaluation. Looked at another way, in constant dollars we have actually reduced the forecast for spending growth in 2011 from 4.7% to 4.3%, which is a 0.4 percentage point drop.
This reduction in the overall IT spending forecast for 2011 is almost entirely the result of a downgrade to the PC forecast, which was concentrated primarily in the U.S. and Western Europe (with reductions to the Asia/Pacific forecast chipping in some additional downward pressure).
The reductions to the U.S. and Western Europe PC forecasts reflect concern for PC growth given likely weak economic growth in 1H11. Rising demand for media tablets is also expected to take a somewhat bigger bite out of PC growth than in 2010. The reduction to the Asia/Pacific forecast for PC spending reflects concern that the region’s strong growth in 2010 likely pulled some growth from 2011, precipitating a write-down of 2011. It also incorporates some effect on China PC growth of the expected slowdown in Chinese economic growth.
So, looking ahead to 2011, I think the economy, the US dollar and the impact of media tablets on adjacent markets will be the things that will continue to move our IT spending forecast.
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by Richard Gordon | October 21, 2010 | Comments Off
We’ve just finished off activities around the release of the 3Q10 update to our IT Spending Forecast – check out our recent Webinar for a summary of the highlights.
Link: http://my.gartner.com/portal/server.pt?open=512&objID=202&mode=2&PageID=5553&resId=1434719&ref=Webinar-Calendar
Now we turn our attention to the 4Q10 update.
Interestingly, the soft patch we noticed in the hardware supply chain during July and August seems to have been a blip; most hardware suppliers are now reporting that sales strengthened in September and there is renewed optimism for continued end market demand in 4Q10. Consumers are still demonstrating an appetite for hot new products and businesses, while remaining cautious, are at least spending on essentials – and CFOs recently surveyed expect spending on technology to increase by about 5% in 2011.
The recent down-tick in the global economic growth outlook is now being seen for what it is - a normal slowdown in growth during the early stages of an economic recovery . So, although there will continue to be mixed signals on the economic front, we think the positives will increasingly outweigh the negatives and that global economy will continued to improve. This should enable business growth and investment to accelerate from next year, which will underpin moderate growth in IT spending.
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by Richard Gordon | September 14, 2010 | Comments Off
And by “we” I mean IT Spending forecasters …
I think the answer is “not really” (we’ve got other things to worry about).
The chance of another global recession on the back of the “great recession” of 2009 is low – most mainstream economists put the likelihood at less than 30% right now – and, even if a technical recession did occur in some economies, we wouldn’t know about it until well after it had happened. Of more concern is the media chatter about the (increasing?) possibility of a “double dip” recession, which will do nothing to dispel the spending caution we’re seeing on the part of consumers and businesses and has the potential to become something of a self-fulfilling prophecy in holding back economic growth.
From a forecasting point of view, then, our real GDP growth assumptions should be not so much about predicting a “double dip” recession in the short term and more about taking a longer term view of the economic recovery … and I think this gives us a more sobering scenario to worry about.
While acknowledging that this is a multi-speed recovery with some countries and regions recovering faster than others, particularly in the Asia Pacific and Latin America regions, it’s clear (to me at least!) that, overall, a return to robust economic growth at the global level is going to take longer and be more stuttering than hoped for.
The issue, as I see it, is that the mature economies of the USA and Western Europe (which between them account for more than 50% of global IT spending) run the risk of having to endure a prolonged period of growth stagnation as unemployment remains stubbornly high while governments grapple with bringing the public finances under control.
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by Richard Gordon | August 17, 2010 | Comments Off
Work is well underway on updating our IT spending forecasts for the 3Q10 release scheduled for the end of September.
After the turmoil of the past couple of years, when the economy and exchange rates played a big part in our forecast thinking, this quarter, with the economic outlook and exchange rates more stable, other factors are coming more to the forefront.
The past year has seen inventory replenishment and the replacement of aging hardware boost spending on IT across all sectors, which has resulted in healthy growth for technology vendors. However, quarterly annual growth comparisons in the past few quarters were made favourable by the dramatic decline in spending in late 2008 and early 2009; in the coming quarters, these comparisons will be tougher.
Talk of weaker channel demand affecting, for example, the PC and mobile phone sectors at the moment is not a surprise given the build-up inventory and the fact that the summertime is typically a slower period. What is of more concern is the uncertainty surrounding the traditional “back to school” and “holiday” period and worries that consumer demand for electronic goods will come in below expectations.
As far as enterprise IT is concerned, businesses remain cautious but they are spending – albeit budget levels are not growing by much and spending is targeted at essential items. Although the global economy had stabilized, growth expectations are being tempered as the economic recovery unfolds. It’s not unusual to see a spurt in economic activity in the early part of an economic ahead of a period of more moderate growth – and this economic recovery certainly has some significant headwinds to navigate in the future, not least of which are the post-stimulus austerity measures being put in place to deal with sovereign debt and the continuing reluctance of banks to lend freely. In this environment, we can expect little growth in enterprise IT spending in the short term.
One thing to watch out for in the medium to long term, though, is the use to which companies put their cash (which many have been generating and hoarding as the economy has recovered). As top-line revenue growth becomes more difficult to achieve, we are likely to see increased M&A activity, a renewed focus on efficiency savings and initiatives to increase productivity … all of which will increase demand for IT-centric business solutions.
So, all the signs are that we’ll see a slow down in IT spending in the short term (at least through 2H09 and 1H10) before consumer confidence improves and the evolving business landscape demands more-strategic investments in IT.
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by Richard Gordon | July 8, 2010 | Comments Off
Phew! That’s the IT spending forecast release over for another quarter; it’s always a bit hectic making sure clients and the press get the new information hot off the press.
We had a lot of press interest in this forecast update, especially in Europe where the attention is on the ramifications for technology demand of the European sovereign debt crisis.
As part of the press activity, I did a short interview about our forecast release on CNBC … http://www.cnbc.com/id/15840232?video=1534780798&play=1 and Gartner’s head of Resaerch, Peter Sondergaard, did the same in the US … http://www.cnbc.com/id/15840232?video=1535010354&play=1 … compare and contrast!
For a more detailed analysis, you can listen to a replay of our latest forecast Webinar here:
http://my.gartner.com/portal/server.pt?open=512&objID=202&mode=2&PageID=5553&resId=1385514
There’s lots of good stuff in there about the short-term impact of exchange rate movements on our forecast and the longer term implications of European government austerity measures on IT spending in the region.
But it’s not all bad news; we actually revised up the short term outlook for hardware due to continued strength in the consumer sector and in emerging economies. Unsurprisingly, most of the interest in the Q&A part of the Webinar was around where we see the hottest growth areas given the uncertain economic outlook. As we turn our attention to the 3Q update ahead of Symposium, we’re going to be focusing on exactly this with particular attention on trying to gauge the strength of demand from end-markets in the important, upcoming “holiday season”.
I’ll blog more on this once I’ve got some feedback from the indsutry on how things are looking for 2H10. In the meantime, any inputs and opinions would be gratefully received.
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by Richard Gordon | June 30, 2010 | 1 Comment
I’m Richard Gordon, Gartner’s first “Chief Forecaster” – welcome to my blog!
You might want to know a bit about me …
I’ve worked in the high-tech industry for more than 20 years, starting off as an engineer in electronics and semiconductor manufacturing before joining Gartner as an analyst 14 years ago. During my time at Gartner I’ve been involved in semiconductor industry analysis and market forecasting, travelling extensively and spending 5 years working out of our Boston, MA office. I’m now back in the UK and for the past 2 years I’ve been responsible for our global IT spending forecast.
My role of “Chief Forecaster” at Gartner was set up about two years ago. We wanted to improve the coordination our forecasting activities for IT spending. It’s my job to ensure that we deliver quarterly updates to our global IT spending forecast on time and with high quality. In practice, that means, every quarter going slightly nuts as 200 or so analysts work to build forecasts to schedule with coordinated assumptions.
My aim is to continuously enhance the value of Gartner’s IT spending forecast by focusing on timeliness, relevance and credibility. By starting a dialogue with the industry, I want to make our work more transparent – sharing more of the thinking behind our forecasts and, at the same time, incorporating some of the discussion and feedback that I hope this blog stimulates.
Enough of the preamble, then, and on with the first blog post! Not entirely coincidentally, it coincides with our latest quarterly forecast update!
The “IT Spending Forecast, 2Q10 Update” is on its way; the numbers are done and the reports are written (well, nearly) so let me share some of the highlights.
Our forecast for 2010 global IT spending growth in US dollars has been revised down – from 5.3% last quarter (in March), to 3.9% now. But this downward revision doesn’t signal a real slowdown. It’s really caused largely by exchange rate fluctuation, with the recent devaluation of the Euro and other European currencies against the US dollar having the most significant impact.
The decline in the value of the Euro has been caused mainly by the European sovereign debt crisis, which we’ve seen European governments struggling to contain over the past few months. Not surprisingly, this has generated quite a bit of interest among our clients, who have been asking us about the potential impact on IT spending.
Our assessment is that, in addition to the short-term currency effect on our forecast, it is likely that IT spending in Western Europe will be adversely impacted in the medium-term to long-term because government action to reduce budget deficits and debt will mean public sector spending cuts and tax rises and a period of sluggish economic growth.
However, to put the likely direct impact into perspective, Western Europe accounts for less than 25% of global IT spending overall, and public sector IT spending is less than 20% of the Western Europe total. Even stringent cutbacks in public sector IT spending in Western Europe, which would see projects being cancelled or postponed indefinitely and departmental budgets being slashed by as much as 25% per year, would likely only result in a 1% to 2% reduction in global IT spending with a marginal impact on growth at the worldwide level.
The indirect impact of government cuts on IT sending in Europe cannot be quantified so easily because of the “multiplier effect” of government spending on private sector economic activity. However, we assume that GDP growth in Western Europe will lag that of other economic regions because of the fiscal constraints imposed on government spending, which will limit the ability of government s to directly stimulate growth in the private sector.
European governments will, therefore, need to develop creative policy responses to stimulate investment in the private sector, which will, ultimately, boost IT spending and help to plug the gap caused by the likely decline in spending by the public sector in the coming years.
Away from Western Europe, as you might expect given the relatively better economic prospects, the outlook for IT spending growth in the emerging economies is rosier. For example, for 2010 through 2014, we expect IT spending growth of about 7% per year on average in Asia Pacific and Latin America, which compares to our forecast of just 2% in Western Europe.
Finally, although the USA has budget deficit and debt challenges of its own, as a result of the huge fiscal stimulus packages employed to tackle the recession in 2008 and 2009, we think it is better equipped and has more flexibility than the Eurozone to promote economic growth, which should feed through into increased IT spending. Therefore, for the USA we are forecasting annual average IT Spending growth of 4% from 2010 through 2014.
Part of our normal cycle for our quarterly forecast now is to run a Webinar where we provide an overview of the numbers and some of the thinking behind them. Of course to get the full details you need to be a Gartner client, but I think anyone with an interest in the trends in the IT industry would find the Webinar of interest. This one is on July 6th, and if you can’t attend live then a replay will be available on the Gartner website. For more information go to: IT Spending Forecast, 2Q10 Update: Growth in an Age of Austerity. If you prefer the video-short version (less than 3 minutes) that’s on YouTube (key search words: IT Spending, Gordon).
I’d welcome your comments, suggestions, and feedback.
Update: Oh, BTW, I did a short interview about our forecast release on CNBC … http://www.cnbc.com/id/15840232?video=1534780798&play=1 and Gartner’s head of Resaerch, Peter Sondergaard, did the same in the US … http://www.cnbc.com/id/15840232?video=1535010354&play=1 … compare and contrast!
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