June 21, 2012
Making a tech market forecast always runs the risk of being overtaken by subsequent events. This risk is particularly acute in Europe in June 2012, when the whole euro project hangs on the brink of potential failure. Yet with Forrester's European CIO Forum conference occurring this week in Paris, we had to make a call on the outlook for the European tech market, rather than wait until the outcome becomes a clear.
So, here is my assumption: the European Union and the European Central Bank will patch together a set of policies that will keep Greece in the euro, provide financing to keep Ireland, Italy, Portugal, and Spain functioning as economic reforms take hold, and offer enough stimulus to prevent something worse than the current, mild recession. As such, in our European tech market report published today (European Information And Communications Technology Market 2012 To 2013 — Spending Growth Comes To A Halt As Europe Slides Into Recession), Forrester is predicting that purchases of information and communications technologies (ICT) by European business and governments will grow by a feeble but still positive 1.2% in 2012 in euros, and a weak but slightly better growth of 3.1%. Let us hope that the alternative of a euro break up, a subsequent deep recession, and a collapse of tech buying similar to that in 2009 does not make this one of the shortest lived predictions we have made.
The details of our European tech market outlook are as follows:
- Given the recessions in Southern Europe, the slumps in the Netherlands and the UK, and the weak growth in Germany, France, the Nordics and other northern and central tier countries, tech markets in the south will fall by 3% to 9% while the rest of the European countries will see growth in local currencies in the 1%-3% range. This will make Europe the slowest growing in a regional tech market, at a time when the global tech market will grow in local currency terms by 6%.
- The traditional tech products that suffer in recessions – computer equipment, communications equipment, and licensed software – will bear the brunt of the slowdown in the European tech markets. In euros, communications equipment purchases will fall by 1.7%, computer equipment will be flat in 2012 with 2011 levels, and software will grow by 1.7%. IT outsourcing will do the best, with 3.3% growth. Business and government spending on telecommunications services will rise by 0.9%, with the decline in wireline usage offset by increased spending on wireless services.
- Among the three larger markets of France, Germany, and the UK, higher levels of adoption of new technologies of cloud computing, smart computing (e.g, analytics, sensors, collaborative process apps), and especially mobile technologies in Germany and the UK will counter some of the effects of slow growth and help those markets do a bit better than the French tech market.
- The weakness of the euro against the US dollar means that the European tech market measured in US dollars will decline by almost 6% in 2012, with negative impacts on the reported revenues of US vendors with significant European sales.
- The European tech market outlook improves slightly in 2013, to 3.1% growth in euros. Software and computer equipment will show the strongest growth, as delayed purchases from 2012 show up in 2013. This forecast of a modest improvement in European tech spending assumes that the risk of a euro break-up has decreased by 2013, and that there is enough monetary easing to offset the effects of fiscal austerity in France, Italy, Spain and the UK to support small 1%-3% increases in real GDP in late 2012 and 2013 across the major European economies.