In what seems to be a never-ending theme in the news these days, global purchases of IT goods and services project to be down in 2009, but spend among insurers should remain above average. These were the findings of a study released last week by Cambridge, Mass.-based Forrester Research Inc., which says the global IT market will decline 3% from last year to $1.66 trillion, which comes on the heels of an 8% rise in 2008.
While Forrester reports in its “Global IT Outlook: 2009” that the declining U.S. dollar boosted 2008 growth rates, the now-stronger dollar will impede growth measured in dollars in 2009. However, the analyst firm predicts IT purchases will recover in 2010, growing by 9% in U.S. dollars.
The study, which analyzed the financial results of many technology vendors (including many vendors in the insurance technology space), asserts that recessions in the United States, and other industrial countries, will be the catalyst for the 2009 slump, with currency fluctuations being a supplemental factor.
Forrester expects Western and Central Europe, and Canada and Latin America to have the weakest growth in 2009—1.3% and 1.2%, respectively, in local currencies, whereas the U.S. tech market will do slightly better, growing 1.6%. In contrast, the report says Asia Pacific and the oil-exporting area of Eastern Europe, the Middle East and Africa will out perform the other regions, but growth there will still be weak, at 3.1% and 5.4%, respectively. Software purchases will do a bit better than other categories, but all vendors will face a tough time until late 2009 or early 2010.
Despite this expected slump in IT spending across all industries, Andrew Bartels, author of the report, believes insurers will still continue to spend IT dollars.
“Insurance, in our view, is one of the industries that has a better growth outlook,” he tells INN.
Bartels explains that insurance on the whole isn’t totally recession-proof. Life insurers and other carriers with large investment streams are struggling with the downturn of the markets—highlighting the fallout of the AIG disaster—but P&C and health insurers aren’t feeling the same impact.
“Their premium revenue is fairly constant and won’t decline,” he continues, noting that the life and annuity outlook is still pretty good. “For many sectors of the insurance industry, they’re not looking at any significant downturns in revenues and, therefore, they’re likely to keep investing, and have strong incentives to invest.”
Bartels says that IT growth in the insurance space is growing at a faster average rate (4% to 5%) than other industries (under 2%), with some segments of the P&C and health industry even doing better.
He goes on to say that insurers currently are most interested in new service-oriented architectures (SOA) for software. Because of the high number of legacy systems, Bartels finds carriers are looking to add flexibility and responsiveness to them, and view SOA as vehicle to achieve that goal. Additionally, he says insurers also are looking at mobile technologies to get data to and from claims adjusters and agents in clients’ homes.
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