Forrester has urged technology budget holders to prepare their “recession playbook” and optimise spending to navigate the transition from the era of strong tech growth in 2018 to the more difficult environments of 2020 and 2021.

In a new report, Forrester has significantly revised its Australian technology spend forecast in order to help CIOs and supply-side technology leaders understand the likely impact of COVID-19 and recent natural disasters in Australia. 

From a base of US$53.6 billion in 2019, Forrester had originally estimated that total spending would reach $58.1 billion by 2021. The numbers were based on a cautiously positive economic outlook. 

Now, citing a level of economic instability not seen since the 2008 global financial crisis, the analysts have come up with an optimistic and a pessimistic forecast. Both predictions are based on new economic data from the IMF and the Australian National University. 

In the optimistic scenario, the impact of COVID-19 on Australia is temporary and leads to a reduction in global activity dampens Australia’s tech growth to 2.3 per cent. 

“Using revised GDP growth rates for Australia of 2 per cent for 2020 and 2.4 per cent for 2021, our tech market growth rates drop by a full percentage point from our previous forecast to 2.3 per cent; we then project a return to growth in 2021 of 4 per cent. What’s driving the reduction in growth in this scenario? Contractions in spending in hardware categories due to supply chain disruptions from China which shut down and noted ‘short-term constraints and delays’ — rather than a lack of demand,” writes Forrester analyst Samuel Higgins. 

Under the pessimistic scenario, the economic shocks are more widely felt and Australia’s tech growth declines to -1 per cent this year before rebounding to 4.3 per cent in 2021. 

“This model assumes that the outbreak can’t be contained and includes, in addition to the impact of external factors, a calculation of the local economic shocks within the Australian economy.” 

“This sudden contraction and recovery is similar to the recovery from the global financial crisis, with all aspects of the tech market contracting in 2020 in response to a six-month recession but expanding further in 2021.” 

According to Forrester the pessimistic scenario is looking increasingly likely. 

Forrester recommends CIOs consider cutting discretionary hardware replacements and upgrades (unless they support work from home operations), pare back the new project portfolio to address core or regulatory requirements, optimise licensing and review non-core cloud subscriptions and renegotiate telecommunications agreements. 

In preparation for a worst-case scenario, CIOs should plan to renegotiate outsourcing agreements and stand down or lay off workers, the report states. 

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