Thursday, 7 February 2008

"Buyer Beware" the forecasters

As quite a few readers may know, I was at the Regent Conference last week. I appeared on the panel at the end of the day and was grilled by Jeremy Paxman. I think this is my 11th appearance at a Regent Conference and my 7th encounter with Paxman. I'm even starting to enjoy it now! Ian Spence gives his own views on the conference on Megatrends from the Regent Conference. I will make reference to several of the presentations in the next few weeks.

I guess the presentation that bugged me most was from 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. In itself, the 2.8% growth in 2008 is half what Forrester was forecasting just a few months ago. (Read Apprehesion grips leading tech players in Friday's FT for a good/disturbing view of the woes hitting even the major tech companies in 2008) I very publically challenged both Brad, and anyone else in the audience, to a bet that double digit IT growth would NOT occur in 2009/10. Nobody was prepared to take my bet.

I did an internet search on Forrester's US IT predictions and it seems that Forrester has been highly consistent....they seem to make habit of predicting a return to double-digit growth in one or two years time. EG in 2002 it was is "double-digit growth will resume in 2003". The actuality was 3%. They then predicted it would resume in 2004. That didn't come to pass either. It is also worth looking at the forecasts they made in the late 1990s for growth in the early years of the new millenium.

But, in that regard, I'm not just picking on Forrester. I could include IDC, Gartner etal. I know this only too well because I seemed to be in open warfare with these firms when I turned 'bearish' in 1998 with my Y2K Lockdown forecasts for 1999, in 1999 for my "The headache will not go away with the Alka Selzers on 1st Jan 00" and again in 2002 with my "IT's all over?" speech and paper.

For the record, since the late 1990s, I have believed that IT growth in US and the "Western World" will NEVER return to double-digit growth. (The only exception would be if we have such a steep recession, such a steep decline in IT spend, that there was then a year or two of 'catch-up') I could list all the reasons for this but, bluntly, I've repeated them so often that you must be getting bored with them by now.

On Friday, I drove down the M4, passing the empty office blocks of Oracle Park - empty since the bursting of the bubble. It reminded me of the damage that can be caused by inaccurate forecasts. I remember visiting many companies in 1999/2000 where the main concern seemed to be "where can we house all the new people we will need in 2001". Office blocks were built and long term leases were signed. Some of these companies went broke as a consequence and others have long-term liabilities on their books. Despite better times in the last few years, many of the office blocks are still unoccupied.

I assume that companies who buy research do so because they intend to make investment decisions based upon it. But I doubt you could sue for money lost due to an inaccurate market forecast. So Buyer Beware would be good advice.

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