As the Indian IT services firms draw close to announcing their third quarter financial results, the news coming from its largest market, the US, predicts a weaker tech market growth for 2012. However cloud computing and smart computing will drive incremental adoption.
The tech market outlook in 2012 is predicted to be moderate at best with IT market growth around 6.6 per cent, and information communications and technology (ICT) market growth including telecom services at 5.6 per cent, said a Forrester report. Both are far cries from Forresters April 2011 forecast of 10.3 per cent for 2012 IT market growth and 8.8 per cent growth for ICT market growth.
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Within the US ICT market, IT consulting, outsourcing services, and software will have the strongest growth in both 2011 and 2012. Growth in IT consulting and systems integration will be 8 per cent in 2012 after 11.2 per cent growth in 2010 and 10.1 in 2011.
“IT consulting services follows and tracks the growth in software, because application integration and implementation services — which are the largest part of IT consulting services — follows the investment in software licenses. However, companies have been turning to services firms for advice in how to take advantage of new technologies such as Smart Computing, cloud computing, and social media, as well as to augment existing IT staff. That demand has translated into strong growth,” said Andrew Bartels, Vice President, Forrester in his report.
Outsourcing spends are expected to rise by 5.7 per cent in 2012, this also included computer hardware maintenance services and support. But revenue growth will slow in 2012 as smaller deals and competitive pricing will erode revenues per client.
Retail, media and entertainment and manufacturing will lead investment in IT for 2012. “Growth was good for ICT buying by banks and securities firms in 2011, but will slow in 2012 as the big banks and investment houses adjust to the constraints of a post-bubble regulatory environment that makes it harder to grow revenues and profits,” said Bartels in his report.
The report also said that IT investment will grow almost twice as fast as the nominal GDP growth of US. The report point out that US tech investment from Q4 2009 to Q4 2010 grew two to three times faster than the nominal GDP over the same time frame.
“One reason that we forecast 7 per cent growth in IT purchases in 2012 —almost twice as fast as the 4 per cent growth we are assuming in nominal GDP — is the strong growth for sales of new technologies like cloud computing and Smart Computing. Our index of revenue growth for representative vendors of these technologies shows growth of at least 19 per cent in 2011 and at least 13 per cent in 2012. While new technologies like these (and others like mobile devices and social media) are still a small part of the overall tech market, they are becoming a growing share of IT purchases and are helping to drive faster growth,” said the report