Irish IT market growing, despite budget pressures

12 Aug 2005

Following a rebound in 2004, the Irish IT market is set to continue growing in 2005, says research analyst IDC in a review of IT Trends and Expenditure in Ireland. However, IT departments in many organisations are facing pressure to cut IT spending.

While the majority of organisations expect business to be better in 2005, many face challenges that mean they need to keep costs down. This will be to the detriment of IT expenditure in many cases. As a consequence, IDC expects growth in the IT market will be slower than that of the economy as a whole.

As a guide to the health of the market, IDC reports 45pc of organisations expect their IT expenditure to be up on last year, while a significant 29pc expect lower spending this year (up from 23pc in 2004).

The primary business challenges organisations are facing are increased competition followed by rising costs. Of course, the IT function is not immune to this pressure to cut expenditure. This is highlighted by the fact that the biggest IT challenges are keeping up to date with technology and keeping down the cost of IT.

It is increasingly clear organisations, many of which are facing intense competition, are not looking to IT investment as a positive contributor to increased competitiveness as they might have done previously, but as a cost to be controlled. In this, the Irish situation mirrors that in other European countries.

As was the case last year, large organisations (500-plus employees) are particularly positive, with 34pc more expecting an increase in IT expenditure than a decrease. This is good news for the larger IT vendors that supply the corporate sector. Government organisations are among the large organisations planning to spend more. Suppliers of IT products and services to smaller organisations are likely to find the going tougher.

The outlook for hardware is moderately positive, with 37pc of organisations expecting the amount they spend to rise. A similar proportion expects their software spend to increase. Only 28pc of organisations surveyed expect IT services expenditure to rise, however.

When further questioned about the use of new IT services, the survey found a lot fewer organisations expecting to buy new services than in previous years. It seems that the purchase of external services is the first thing to be outlawed under cost-cutting measures. This makes things more difficult for suppliers that are even more dependent on product sales for revenue.

Uptake of broadband internet access continues with 37pc of organisations in the survey claiming this is their primary access method. The findings suggest this will cross the 50pc mark within the next year.

By John Kennedy