IDC’s FutureScan: IT Buyers Ignore Economic Storm Clouds, Expect More Spending Growth in 2007 than 2006

FRAMINGHAM, Mass., January 3, 2007 – This month’s IDC FutureScan depicts a rare alignment of IT buyer expectations, vendor revenue forecasts, and macroeconomic indicators that all seem to ignore economic forecasts for a cooler U.S. economy in 2007.

The Buyer Sentiment metric came in at 1071 and the Market Indicator at 1070, both of which point to expectations of IT spending growth in the U.S. in 2007 of 7%. IDC’s latest official forecast, published in its Worldwide Black Book, is for U.S. IT spending growth to hit 6.3% in 2007.

Because the IDC FutureScan combines results from surveys of CIOs and line-of-business executives, Wall Street forecasts, and macroeconomic measure such as interest rates, expected corporate profits, and the stock market, it is rare that all the component numbers come in at the same value.

“True, these external market measures aren’t that far off from IDC’s forecast,” notes John Gantz, IDC’s Chief Research Officer. “But we are still worried they are too optimistic. The economic forecasts for the U.S. for 2007 are a lot lower than 2006, especially corporate profit growth, which is expected to drop 75% to mid-single digits. Falling profits eventually mean falling IT budgets.”

(The latest Consensus Economics, Inc. poll in December forecasted U.S. GDP growth for 2007 at 2.3% and profit growth at 5%.)

“Our real worry,” added Gantz, “is that these expectations are built on a fragile economic basis. One big wild-card event, such as an unexpected oil shock or a continuation of the decline of the U.S. housing market, could ripple through the economy quite fast and put the brakes on discretionary IT spending.”

The good news, Gantz noted, is that IDC’s research shows IT spending shifting to both longer term projects and projects that enhance revenues or competitiveness, such as business analytics, enterprise portals, collaboration, mobility, and product development.

FutureScan is a set of market metrics that measure supply and demand in the IT industry based on leading indicators and customer surveys. Values reflect expectations of future growth, with an index value of 1000 indicating zero growth and each additional 10 points representing roughly 1% of expected growth or contraction.

Buyer Intent reflects market demand for IT products and services over the next 12 months. The January index value was 1071, up from December’s 1062. The Market Indicators number combines input from economic and IT industry revenue forecasts and was 1070 in January, down slightly from 1074 in December.

FutureScan results for January and prior months can be viewed at www.idc.com/futurescan. For more information about FutureScan, or any other products from IDC’s Global Research Organization, please contact Mike Shirer at 508-988-7982 or mshirer@idc.com.