IT market forecasting is dangerously broken
Duncan Chapple
Analyst Relations lead for Elisa Industriq & Elisa Polystar @ SageCircle | Analyst Observatory co-director @ Edinburgh University
Chad Huston is one of the most respected IT market forecasters, specialising for several years on the IT services markets. Something shocking about?his analysis?of financial reports of IT services companies, which he has organised into ten main clusters of IT service providers: although none of these clusters is growing over 5% a year, some analyst firms continue to forecast sector-wide growth around 7%.
These forecasts cannot be right. The reported financial results and the forward-looking guidance provided to vendors are clear. It's unimaginable that the market will grow even 5% this year, but many analyst firms are forecasting higher growth.
The forecasts are broken for many reasons, but the key reason is that most analyst firms are using buyers' statements about expectations, which are as optimistic as my predictions for how often I will go to the gym next month (and for similar reasons). Other firms are using behind-the-scenes nudges from some vendors who report optimistic expectations. As a result, the forecasts are way out.
I'm hosting a webinar to discuss this with Chad and another IDC alumnus, Rory Duncan . Rory's experienced the making of many market forecasts and has a lot to add to this conversation.
You can see more about the webinar here: https://bit.ly/TrueForecasts and register for free.
CEO and Principal Analyst / Top 10 Global Tech Analyst
6 个月Enter the room The Futurum Group with our Intelligence platform. DM for a demo.
Research Director | Software & Digital Services Markets
6 个月Another factor might be analyst firms' internal processes for forecasts updates which may be too slow - due to the need for consistency betweeen hundreds of segments and subsegments
VP Channel Research & Advisory
6 个月If 80% of the market grows at 5% and 20% of the market grows at 16%, the overall market grows about 7%. Larger companies will often have slower growth rates (law of large numbers), and the overall market growth will trend close to that collective. But if there are factors to show that the rest of the market is feeding off higher double-digit growth, it is quite feasible to come to the conclusion that the overall market is pacing faster. Of course it is much harder to measure the long-tail though
IT Services B2B Primary Research, Custom Research, Market Sizing and Forecasting.
6 个月Seems like an interesting discussion, although I don't believe the leading forecasters are ever relying on buyer intention data alone. Nevertheless, there is a tendency to always be over optimistic. I recall at Gartner reviewing a Forecast analysis draft that reported the forecast was being adjusted downwards for the umpteenth consecutive quarter and suggesting perhaps not to admit that fact!!! In the current climate though, I suspect that for shorter term forecasts at least, a reliance on economic forecasts (IMF and others) that predicted a slightly faster return to growth as a feed into models may be one of the causes for higher forecasts this time round.