2010 Forrester Research, Inc. Reproduction Prohibited1 2009 Forrester Research, Inc. Reproduction ProhibitedTeleconferenceQ4 2010 US And Global IT Market Outlook For 2010-2012 Andrew H. Bartels, Vice President, Principal AnalystDecember 16, 2010. Call in at 12:55 p.m. Eastern time 2010 Forrester Research, Inc. Reproduction Prohibited2We remain relatively positive on the IT market outlook despite questions about the economic outlook.We now forecast 7.5% growth for the US IT market in 2011 and 6.9% in dollars for the global IT market. 2010 Forrester Research, Inc. Reproduction Prohibited3Source: October 15, 2010, “US And Global IT Market Outlook: Q3 2010” Forrester report and July 21, 2010, “USAnd Global IT Market Outlook: Q2 2010” Forrester reportForrester forecasts for global and US IT purchases(Percentage change from prior year in US dollars)The 2011 IT market outlook is still positive and in line with our earlier forecasts 2010 Forrester Research, Inc. Reproduction Prohibited4Our 2011 IT market forecast is more optimistic than our competitorsThe global IT market will grow by 7.1% in 2011!Gartner:3.1% growthin 2011 2010 Forrester Research, Inc. Reproduction Prohibited5Forrester current forecasts for global and US IT purchases in 2011(Percentage change from prior year in US dollars)Software and IT services lead US IT market growth; computer equipment and services head up global 2010 Forrester Research, Inc. Reproduction Prohibited6Three factors drive our IT market forecastEconomic conditions Growth in nominal GDP, business profits, productivity trends, and presence or absence of recessionTechnology cycles Tech innovation and growth cycle versus tech digestion cycleFor global forecast, exchange rates Value of US dollar versus euro, yen, and other major currencies 2010 Forrester Research, Inc. Reproduction Prohibited7US$ billions5.6%9.4%$6018.2%7.5%$658$501$529$555$517$5594.8%-6.7%US IT purchases will rise by 7.5% in 2011*Forrester forecastSource: US Department of Commerce for 2004 to 2009 for computers and peripherals, communications equipment, and software; Forrester Research for these items in 2010 to 2012 and for IT consulting and outsourcing services in 2004 to 2012 2010 Forrester Research, Inc. Reproduction Prohibited8US$ billions5.7%7.7%$9575.6%6.3%$749$792$828$792$837$8894.5%-4.2%Factoring in telecommunications, US ICT purchases will rise by 6.3% in 2011*Forrester forecast Source: US Department of Commerce for 2004 to 2009 for computers and peripherals, communications equipment, and software; Forrester Research for these items in 2010 to 2012 and for IT consulting and outsourcing services in 2004 to 2012 2010 Forrester Research, Inc. Reproduction Prohibited9Revival in almost all categories of US ICT purchases except telecom in 2011 and 2012IT budget categories (percentage change)200720082009 2010* 2011* 2012*Computer equipment2.5%2.8%-11.8% 17.2%6.4%6.8%Communications equipment6.8%4.3%-18.8%6.5%6.6%7.3%Software6.9%6.2%-0.8%9.4%8.4%13.0%IT consulting services4.6%5.7%-5.4%4.2%8.2%9.1%IT outsourcing5.4%3.8%-0.2%2.5%6.9%6.5%Total IT purchases5.6%4.8%-6.7%8.2%7.5%9.4%Telecom services6.0%3.8%0.8%0.8%3.8%4.0%Total ICT purchases5.7%4.5%-4.2%5.6%6.3%7.7%2010, 2011, and 2012 US ICT purchases forecast(Percentage change in US dollars)*Forrester forecastSource: US Department of Commerce for 2004 to 2009 for computers and peripherals, communications equipment, and software; Forrester Research for these items in 2010 to 2012 and for IT consulting and outsourcing services in 2004 to 2012 2010 Forrester Research, Inc. Reproduction Prohibited10ForecastPercentage change from prior yearThe 2008 to 2009 recession and financial crisis caused tech investment to drop sharply in 2009.US tech investment growth in 2011 will outpace the upturn in nominal GDP growth 2010 Forrester Research, Inc. Reproduction Prohibited11 2009 Forrester Research, Inc. Reproduction Prohibited*Forrester assumptionsUS real GDP and GDP deflator(Percentage change from prior quarter at annualized rate)Seven-quarter recession periodThe pace of US economic growth slowed to 2.5% for real GDP in Q3, with weak growth ahead 2010 Forrester Research, Inc. Reproduction Prohibited12 2009 Forrester Research, Inc. Reproduction ProhibitedRecessionUS business investment in IT products(Percentage change from prior year)Government data showed strong growth in US investment in IT in first three quarters of 2010*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited13 2009 Forrester Research, Inc. Reproduction ProhibitedRecessionLarge-vendor US revenues are growing by around 10% in 2010, but they see growth slowing to 5% to 8% in 2011 US revenues of largest IT vendors(Percentage change from prior year)*Forrester forecast* Weighted average of growth rates for computer equipment, communications equipment, and software, with weights based on these products share of total IT investment in the US Department of Commerce dataSource: Based on 2009 to Q3 2010 quarterly financial reports of 45 large, global currently active IT vendors 2010 Forrester Research, Inc. Reproduction Prohibited14US ICT purchases by major industry, 2009 to 2012$783$762$859US$ billions*Forrester forecast$804 2010 Forrester Research, Inc. Reproduction Prohibited15Growth in US ICT purchases by industry, 2010 to 2011Growth from prior year*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited16 2009 Forrester Research, Inc. Reproduction ProhibitedSaaS will grow its share of the software market but unevenly, with some software categories resistantShare of total global software market for software products with different rates of SaaS adoption 2010 Forrester Research, Inc. Reproduction Prohibited17US$ billions*Forrester forecast7.8%10.5%7.1%8.7%$1,356$1,498$1,613$1,473$1,579$1,838-8.7%7.2%The global IT market in 2011 will recover all the ground lost in 2009$1,690 2010 Forrester Research, Inc. Reproduction Prohibited18Global growth in high single digits in all categories in 2011 and 2012IT budget categories (percentage change)200720082009 2010* 2011* 2012*Computer equipment9.4%4.8%-13.7% 11.2%7.4%8.3%Communications equipment10.7%9.5%-14.0%6.9%6.2%7.3%Software11.1%8.9%-5.7%8.2%7.1%11.5%IT consulting services9.9%9.3%-3.5%5.6%7.4%8.0%IT outsourcing9.8%7.5%-4.9%2.8%7.1%7.6%Total IT purchases10.2%7.9%-8.7%7.2%7.1%8.7%2010, 2011, and 2012 global IT purchases forecast(Percentage change in US dollars)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited19 2009 Forrester Research, Inc. Reproduction ProhibitedThe dollar is up and down against the euro and pound and down against Asian and Americas currenciesForeign currency per US dollar (Q1 2008 = 100)*Forrester forecast, as of December 7, 2010 Source: Based on quarterly average exchange rates from OANDA 2010 Forrester Research, Inc. Reproduction Prohibited20Business and government purchases of IT goods and services(Percentage change from prior year in local currencies)Most regions will see slowing local currency growth in 2011, with Latin American and EEMEA accelerating*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited21Business and government purchases of IT goods and services(Percentage change from prior year in US dollars)In US dollars, regions will grow between 5% and 10% in 2011*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited22US$ billions*Forrester forecastThe Asia Pacific IT market is now bigger than Europe7.8%10.5%7.1%8.7%$1,356$1,498$1,613$1,473$1,579$1,838-8.7%7.2%$1,690 2010 Forrester Research, Inc. Reproduction Prohibited23US$ billions*Forrester forecastThe Tech Twelve are largest and most advanced IT markets7.8%10.5%7.1%8.7%$1,356$1,498$1,613$1,473$1,579$1,838-8.7%7.2%$1,690 2010 Forrester Research, Inc. Reproduction Prohibited24Canadian$ billions*Forrester forecast3.6%3.0%5.8%7.8%$50$52$54$52$55$62-3.6%5.6%The Canadian IT market in C$ will grow by 5.8% in 2011, 7.8% in 2012$58 2010 Forrester Research, Inc. Reproduction Prohibited25IT outsourcing will be the fastest-growing IT category in Canada in 2011, with software as the pace setter in 2012IT budget categories (percentage change)200720082009 2010* 2011* 2012*Computer equipment-1.3%-5.4%-11.7%8.4%5.3%5.7%Communications equipment-8.6%9.7%-2.6%10.8%5.6%6.2%Software14.3%6.9%-0.6%2.0%6.2%10.7%IT consulting services1.0%5.0%-2.0%6.0%4.1%8.5%IT outsourcing5.3%6.5%-0.1%3.7%8.0%6.4%Total IT purchases3.0%3.6%-3.6%5.6%5.8%7.8%2010, 2011, and 2012 Canadian IT purchases forecast(Percentage change in Canadian dollars)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited26Canadian$ billions*Forrester forecast3.6%3.0%5.8%7.8%$50$52$54$52$55$62-3.6%5.6%The Canadian government IT market will show little or no growth, with business IT market expanding more$58 2010 Forrester Research, Inc. Reproduction Prohibited27The different role of government purchases in Canada versus US IT marketsIn Canada, government purchases stayed high in recession, dampening the decline, but are now falling; in the US, government IT purchases fell with recession but will lag recovery in 2011 and 2012US government and business IT purchases (percentage change in US dollars)Canada government and business IT purchases (percentage change in Canadian dollars)*Forrester forecastSource: Based on data for US from US Department of Commerce and for Canada from Statistics Canada 2010 Forrester Research, Inc. Reproduction Prohibited28Exchange-rate adjusted US$ billions*Forrester forecast12%10%12.4%15%$69$76$85$79$85$110-7%8%Latin America IT market in local currencies by 12% in 2011 and 15% in 2012$96 2010 Forrester Research, Inc. Reproduction Prohibited29Computer equipment, software, and IT outsourcing will be the fastest-growing Latin America IT categoriesIT budget categories (percentage change)200720082009 2010* 2011* 2012*Computer equipment6%6%-12%15%19%22%Communications equipment13%16%-14%5%7%9%Software11%13%-6%12%16%20%IT consulting services6%9%6%3%9%12%IT outsourcing9%12%5%8%17%18%Total IT purchases9%12%-7%8%12%15%2010, 2011, and 2012 Latin American IT purchases forecast(Percentage change in exchange-rate adjusted US dollars)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited30Latin American country economic and IT market growthExcept for Venezuela, Latin American countries are recovering quickly from 2009 recession, with IT purchases growing faster in 2011Latin American real GDP(percentage change in local currencies)Latin American country IT purchases (percentage change in local currencies)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited31Euros billions*Forrester forecast-0.9%5.0%5.9%7.3%291 305 302 278 289329-8.2%4.1%The European IT market will not return to 2007 levels until 2011 306 2010 Forrester Research, Inc. Reproduction Prohibited32Moderate growth in all IT categories in Western and Central EuropeIT budget categories (percentage change)200720082009 2010* 2011* 2012*Computer equipment4.1%-5.6% -15.1%6.6%6.3%7.4%Communications equipment4.7%1.4%-8.7%4.8%5.5%6.8%Software8.1%2.8%-8.8%4.5%3.8%8.8%IT consulting services4.0%-1.3%1.7%1.7%6.4%7.0%IT outsourcing4.2%-1.1%-8.5%2.8%8.0%6.4%Total IT purchases5.0%-0.9%-8.2%4.1%5.9%7.3%2010, 2011, and 2012 Western and Central Europe IT purchases forecast(Percentage change in euros)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited33Euros billions*Forrester forecastGermany, UK, France, and Scandinavia are the largest European markets-0.9%5.0%5.9%7.3%291 305 302 278 289329-8.2%4.1% 306 2010 Forrester Research, Inc. Reproduction Prohibited34European country economic and IT market growthNorthern European countries will outperform southern European countries, both in GDP and in IT purchasesEuropean country real GDP(percentage change in euros)European country IT purchases (percentage change in euros)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited35Exchange-rate adjusted US$ billions*Forrester forecast16%15%12%12%$58$67$78$71$76$96-8%7%Eastern Europe, the Middle East, and Africa (EEMEA) IT market will rise by 12% in 2011 and 2012$86 2010 Forrester Research, Inc. Reproduction Prohibited36All categories except consulting services growing at double-digit rates in 2011 and 2012 in EEMEAIT budget categories (percentage change)200720082009 2010* 2011* 2012*Computer equipment12%16%-10%8%12%14%Communications equipment10%16%-14%5%12%11%Software20%20%-7%10%13%14%IT consulting services23%14%2%7%10%7%IT outsourcing16%18%-5%3%18%15%Total IT purchases15%16%-8%7%12%12%2010, 2011, and 2012 Eastern Europe/Middle East/Africa IT purchases forecast(Percentage change in exchange-rate adjusted US dollars)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited37EEMEA country economic and IT market growthEnergy and natural resource expansion and inflation drive IT purchase growth higher than real economic growthEEMEA real GDP(percentage change in local currencies)EEMEA country IT purchases (percentage change in local currencies)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited38Exchange-rate adjusted US$ billions*Forrester forecast6%7%8%9%$283$302$320$313$335$391-2%7%Asia Pacific IT market in local currencies will rise by 8% in 2011 and 9% in 2012$360 2010 Forrester Research, Inc. Reproduction Prohibited39Software and IT services are the fastest-growing IT categories in Asia PacificIT budget categories (percentage change)200720082009 2010* 2011* 2012*Computer equipment7%2%-6%7%8%8%Communications equipment7%6%-2%6%7%8%Software6%5%-2%8%7%10%IT consulting services6%10%1%8%9%9%IT outsourcing7%9%3%3%6%10%Total IT purchases7%6%-2%7%8%9%2010, 2011, and 2012 Asia Pacific IT purchases forecast(Percentage change in exchange-rate adjusted US dollars)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited40Exchange-rate-adjusted US$billions*Forrester forecastChina has now become the largest Asia Pacific market, pushing Japan into second place6%7%8%9%$283$302$320$313$335$391-2%7%$360 2010 Forrester Research, Inc. Reproduction Prohibited41Asia Pacific country economic and IT market growthAsia Pacific countries except for Japan are booming, both in GDP and in IT purchasesAsia Pacific country real GDP(percentage change in local currencies)Asia Pacific country IT purchases (percentage change in local currencies)*Forrester forecast 2010 Forrester Research, Inc. Reproduction Prohibited42RecommendationsFor computer equipment vendors, the best growth has already occurred.For communications equipment vendors, the enterprise market for unified communications and videoconferencing presents the best opportunity.For software vendors, 2011 and 2012 will be period of strong growth.For IT services vendors, IT consulting and SI project work will rise, but IT outsourcing will lag.Focus on the Tech Twelve countries for leading-edge technologies like Smart Computing solutions and software and IT services.BRICs and other emerging markets will be best for hardware and outsourcing.Europe and Japan will lag the rest of the markets.Vendors should expect solid IT market growth in 2011 and stronger growth in 2012. 2009 Forrester Research, Inc. Reproduction ProhibitedThank youAndrew H. Bartels+1 516.869.0128abartelsforrester.comwww.forrester.com