Technology research firm Gartner projected a 5.1 percent rise in global spending on technology in 2011, up from its prior estimate of a 3.5 percent rise, helped by the dollar’s recent weakness.
The research firm now expects global spending on technology to touch $3.6 trillion while IT spending rose 5.4 percent to $3.4 trillion for 2010, which is higher than Gartner’s prior estimate of 3.2 percent.
Aided by favourable U.S. dollar exchange rates, global IT spending growth is expected to exceed 5 percent in 2010, but a similar level of growth in 2011 -- while forecast -- is far from certain, given continued macroeconomic uncertainty, said Richard Gordon, vice-president of research at Gartner in a note.
He said global economic recovery has been hampered by a sluggish growth outlook in key economies of US and western Europe although the economic situation worldwide is improving.
Gartner said spending on telecom equipment will rise 9.1 percent in 2011 to $465.4 billion and spending on telecom services will rise 3.4 percent to $1.65 billion.
The research firm forecast a 4.6 percent rise in IT services spending to $817.9 billion.
Gartner said the computing hardware segment, where spending is forecast to grow 7.5 percent to $391.3 billion, is likely to face challenges in growth of personal computers due to a possible weak economic growth through the first half of 2011.
However, Gartner said the ability of key emerging economies to sustain relatively high growth rates was a matter of concern.
Indian tech firms' growth to ease
Meanwhile, India’s top four tech companies – Tata Consultancy Services, Infosys Technologies, Wipro and HCL Technologies - are expected to grow sequentially by 5 percent for the quarter ended December, down from a 7.6 percent quarter-on-quarter growth in the preceding quarter, The Economic Times reported citing estimates by five brokerages and its in-house research group.
Indian tech companies are expected to report a marginally slower growth in the December 2010 quarter due to fewer working days and pending IT budgetary decisions by clients.
However, long-term demand for outsourcing is expected to remain buoyant.
The report said Wipro’s revenue is expected to grow fastest at 7.6 percent for the quarter followed by HCL Technologies at 7 percent while TCS and Infosys are expected to grow at 3 percent to 4 percent during the quarter.
Religare Securities said in its IT preview report that IT budgets for 2011 are likely to be flat or marginally higher with slightly greater allocation for software services notwithstanding an improvement in corporate profits and large cash balances.
The report also said the impact of appreciation of the rupee on margins is likely to be muted due to expectation of sustained realizations and cost efficiencies.
Operating margin at the aggregate level may expand sequentially by 180 basis points (bps) to 28 percent over and above the 50 basis points improvement in the previous quarter.
Operating margin of Infosys is likely to improve by 270 basis points to 33 percent on a sequential basis, which is better than the rest. HCL is expected to witness a margin erosion of 70 basis points at 16 percent on account of a higher impact of the unfavorable currency movement.
Tech companies seem optimistic about future demand growth following their enthusiasm to increase their headcount.
The BSE IT index has gained 12 percent more than the benchmark Sensex in the past three months, capturing the near-term growth prospects of the top IT companies.