According to research from Compass Intelligence, the current economic slowdown is expected to result in lower business expenditures on IT products and services. Annual spending growth on services will decline from 5.3% growth in 2007 to 3.9% growth in 2008. It is anticipated that the economic slowdown will continue through 1H 2008. But this is expected to be a temporary slowdown and by 2009, growth should increase to 4.8%.

"In the past, there has been a strong parallel between total growth in the economy and growth in IT spending," says contributing analyst Amy Cravens. "IT budgets are vulnerable. As corporate spending tightens, IT budgets are quickly impacted as they can be easily downsized." As the US economy shows signs of recovery in 2H 2008, which will be partially instigated by the Economic Stimulus Act signed by President Bush in late February, it is expected that IT spending will follow suit. However, the impact of the economic downturn, and the ability to recover, will vary across spending categories.

"The first half of 2008 may prove to be more difficult for infrastructure providers, where customers will hold off on non-essential investments until the 2nd half of this year," says Kneko Burney, President and Chief Strategist of Compass Intelligence. "Additionally, infrastructure vendors, namely the high-end systems vendors, can expect an onslaught of competition from managed services providers. There has never been a time better for managed services than now," adds Burney.

While it is expected that overall US Business IT spending growth will slow in 2008, several segments and verticals will continue to experience strong growth. Compass Intelligence anticipates the following:

- Outsourcing services is the strongest area of spending growth in 2008. This is the one spending category that Compass Intelligence anticipates an increased growth rate for 2008 at 9.8% up from 8.6% in 2008.

- Mid-sized business will have the greatest spending growth in 2008, increasing 5.9% over 2007. Small business will also have strong spending growth at 4.5% this year versus 2007 levels.

- Services are the fastest growing vertical, increasing 5.1% in 2008, with total IT spending of $231 billion.