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IDC FUTURESCAN is a collection of metrics of IT industry leading indicators and customer surveys. Values are
based on expectations of future growth, with a value of 1000 equating to zero growth and each 10 points representing roughly 1% of expected growth.
These are external indicators only and don't represent IDC's forecast for the market, which is based on many more inputs and which relies on strict methodologies
and market definitions.
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This Month's Results
It turns out that last month's fall in the Futurescan index was more than a blip. For the second month running, Line of Business managers have slashed their own expectations for IT spending over the next 12 months, dragging the overall index down to its lowest mark since the start of the year. Market indicators are also retreating, with stock markets moving up and down but mostly down while investors try to make sense of the ongoing turmoil in Europe and its possible ramifications for the rest of the global economy.
Europe is the main reason for this sense of uncertainty and anxiety, but there's also a growing sense of unease about the US economy too. IT spending is generally still pretty stable, but there have been reports of softening demand in some market segments (e.g. network equipment). Mostly, though, the index is going down because of worries about what the near-term future will hold, rather than in direct reaction to any major downturn in the macro environment. Let's hope that, just like last year, those worries prove to be overblown.
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History
There's a certain sense of déjà-vu about all of this. Almost exactly a year ago, investors and business managers started to worry about the possible fallout of a crash in Europe and what it would mean for the still-vulnerable US and global economy. By the summer of 2011, our index of leading indicators had fallen so far and so hard that businesses were predicting negative IT spending growth in the next 12 months, while external market indicators weren't much better. Then, the downside scenario didn't materialize and within six months the markets had shrugged off that apparent loss of nerve and optimism. Now, one year on, here we go again.
Will things play out the same, this time around? At least half of the problem is that nobody knows what's going to happen next in Europe, and it's that lack of visibility which is responsible for choking off some of the bullishness were we recording just a couple of months ago. If Greece exits the Euro in the next 4-6 weeks, then all bets are off, and markets will be (at best) volatile until the end of the year.
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Buyer Intent History:
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CIO confidence actually stabilized this month, while not recovering much of the ground it lost in April. Line of Business managers, though, have grown ever-more bearish since March, and are now predicting (on average) that their own organization's IT spending will go up by less than 1% over the next year. That sounds over-pessimistic to us, given that US IT spending grew by its fastest rate since Y2K in 2011, and given continuing strong demand for smartphones, tablets, storage and software. CIOs are expecting (on average) an increase of just over 3%, which isn't a million miles away from our own forecast when you take out consumer spending on mobile devices. But if business managers are as anxious and uncertain as our polls are indicating, this will make for some strained conversations, extended decision-making cycles and a generally greater sense of scrutiny when it comes to signing off on new IT projects. It's not the first time that CIOs and business managers have moved in opposite directions, and it won't be the last.
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Market Indicators History
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Revenue forecasts for the IT sector are starting to trickle down slightly, in the wake of some volatile vendor earnings announcements, and stock markets are continuing to lose some of the ground they'd gained over the past six months. Economists have yet to take a sharp knife to their forecasts for GDP and corporate profits, though, so the overall macroeconomic index is still pointing at growth of around 5%. That's higher than CIOs are expecting their own budgets to increase by, but it confirms the sense that much of the decline in confidence is rooted in a perceived slowdown rather than an actual slowdown -at least so far.
For the next 3 months, all eyes will be on the software and services sector, which is the best indicator of long-term spending trends (capital spending on hardware can be more volatile, and may show some weakness in the near term due to the apparent decline in business confidence). If businesses maintain their investments in project-based spending initiatives such as data analytics, mobile application development and cloud adoption, we can be reasonably confident that the wind is still blowing in the right direction. That's not to say, however, that the wind won't blow down a few trees in the meantime.
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The Buyer Intent metric is based on surveys of 400-500 U.S. CIOs and line-of-business executives on their expectations for IT spending growth during
the next 12 months. Results are carefully weighted to be representative of the U.S. market. These surveys are conducted monthly by the Quantitative Research Group
(QRG) within IDC's Global Research Organization.
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The Market Indicator metric combines inputs from economic and IT industry supply-side indicators including:
- The stock market (S&P 500 over last 6 months)
- Current interest rates
- The current GDP forecast for the next 12 months
- The current US corporate profit forecast (next 12 months)
- The IDC IT Revenue Forecaster (% revenue growth expected next 2 quarters)
IDC combines and weights the inputs using information developed in its Leading IT Indicators program on the relationship of macroeconomic trends to IT spending.
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IDC FUTURESCAN is a collection of metrics of IT industry leading indicators and customer surveys. Values are based on expectations of future growth, with a value
of 1000 equating to zero growth and each 10 points representing roughly 1% of expected growth.
These are external indicators only and don't represent IDC's forecast for the market, which is based on many more inputs and which relies on strict methodologies
and market definitions.
For more information about any of IDC's Black Books or other GRO products, please contact Amie White at awhite@idc.com
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