Thursday, 2 April 2009

IT forecasts - Holway's Rant

(By Richard Holway 8.00am 2nd Apr 09) You may well have read Crisis to force further cuts in IT spend in the FT 1st Apr 09 where both Gartner and Forrester have revised their forecasts for IT – and SITS – spend sharply downwards. Both are now predicting declines for 2009 whereas as recently as three months ago continued growth was forecast.

Seasoned readers of UKHotviews – indeed any of my rants over the last 20 years – will know that the failures of the ‘main’ forecasters to forecast really gets me going. My ‘problem’ is that I have files full of critical comment about my own forecasts when first made being ‘too gloomy’ whereas they have mostly proved not to be gloomy enough! Compared to other forecasters I could be big-headed and say that our record was ‘second to none’ and that our trend-line forecasts have been amazingly accurate. A record that stretches back over 20 years and includes our well-documented warnings in 1998 about the likely bursting of the and Y2K ‘bubbles’.

Just so new readers don’t say something like “with the benefit of hindsight…” first I suggest you read Tempus in The Times 2nd Feb 08 – ie over a year ago:

"Even if the turbocharged Autonomy is excluded, the sector's average forecast earnings growth this year is still a heady 16 per cent. Given historic sales growth in recent years of about 12 per cent, that assumption would appear to be far too optimistic — especially given predictions from the likes of IDC and Forrester that industry revenues will rise by between 3 per cent and 5 per cent in 2008. Holway, the respected UK IT analyst, is even less bullish and expects no growth at all. On that basis, it would be prudent to assume that consensus earnings forecasts are too high and that the investors should be braced for profit warnings."

Then I suggest you read my rant a few days later - Buyer Beware the Forecasters 7th Feb 08 – which was occasioned by a pretty public row at the 2008 Regent Conference that I had with Brad Holmes, VP at Forrester, and his prediction that US IT spend would be back to double digit growth in 2009 and 2010 after slipping from 6.2% in 2007 to 2.8% in 2008. I very publicly challenged both Brad, and anyone else in the audience, to a bet that double digit IT growth would NOT occur in 2009/10 and that we would actually see a decline. Nobody took my bet!

At TechMarketView, for over a year now we have been forecasting negative growth in the UK SITS sector in 2009 with no return to positive growth until late 2010.

Back in Sept, I got so annoyed about this situation that I wrote So, what forecasts to do want? Optimistic ones or realistic ones? I do often get the feeling that because (of course) companies in our industry wants to do well and grow, that they buy the research that backs up their aspirations. As I have also repeated many times “Hope is NOT a Strategy!”

If you are STILL planning on a return to overall IT or even overall SITS growth soon (or even a return to double digit growth anytime) then you are deluding yourself with likely disastrous consequences for your company. If you had erroneously made your plans for 2009 and 2010 based on more optimistic forecasts, maybe you should take that up with those other forecasters and see if they might offer you some compensation?

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