April 1, 2011
Forrester just published our latest forecast for the US market for business and government purchases of information technology (IT) goods and services (April 1, 2011, "US Tech Market Outlook, Q1 2011 — Building a Springboard For Even Stronger Growth in 2012"), and we have raised our 2011 and 2012 outlooks: we now forecast 8% growth in the US in 2011 (up from our 7.4% forecast in January) and 10.3% in 2012 (compared with a 9.3% forecast earlier). For the broader ICT market (information and communications technology, adding in telecommunications services), 2011 growth will be 6.8% compared to a 5.1% rise in 2012.
We raised our forecast in spite of worries about the strength of the US economic expansion as a result of higher oil and gas prices, government layoffs, and supply chain and trade disruptions from the tragic events in Japan. Why? One reason is that, even with those worries, US economic growth still looks solid (as evidenced by the 216,000 increase in nonfarm payroll employment in March, 2011 — see US Bureau of Labor Statistics, "The Employment Situation — March 2011), albeit weaker than what would be needed to drive a substantial reduction in unemployment. But more important is the strong momentum in business purchases of technology goods and services. 2010 growth in the US tech market turned out to be 8.9%, even better than the 8.4% growth we projected in April 2010. And early Q1 2011 earnings reports from Accenture and Oracle showed strong growth in their software and services revenues (see March 25, 2011, "Q1 2011 Results For Accenture And Oracle Point To Strong 2011 For IT Services And Software").
As the Accenture and Oracle results suggest, the markets for software and IT consulting and systems integration services will see some of the strongest growth in 2011, with software purchases rising by 8.6% and IT consulting and systems integration services up by 8.1%. Computer equipment purchases, which lead the tech market recovery in 2010 with almost 20% growth, will slow to a still respectable 7.3% in 2011. Communications equipment — especially for unified communications, video conferencing, and mobility at businesses and governments — will see 8.3% growth in 2011, though telecommunications carriers purchases will increase more slowly — and could decline if the AT&T acquisition of T-Mobile goes through and results in cutbacks in the combined entities purchases of equipment. IT outsourcing will lag, growing by 7%, and telecommunications services will do even worse, with 3.4% growth as the decline in wireline services offsets much of the growth in wireless services.
By industry for total ICT purchases, we expect manufacturing will see the strongest growth in 2011, followed by business services (especially professional services and transporation and equipment). Weakest growth will be in media, entertainment and leisure and especially in the government sector, where budget cutbacks at the Federal, state, and local level will cause almost no growth. Enterprise purchases will do slightly better than purchases by small and mid-size businesses.
One key trend to watch for is vendors upgrading their revenue expectations. Despite the strong 2010, vendors have been very conservative in their forecasts for 2011 revenue growth. Indeed, vendors' projections of 2011 revenue growth — as reflected in the revenue growth forecasts of stock analysts — have been running below our forecasts. With Accenture and Oracle raising their projections for 2011 revenue growth following their strong Q1 2011 results, I think we will see other vendors re-setting their own bars for their revenue growth in 2011 to higher levels.