IT industry returns to growth in 2010

22 Nov 2010

The information technology industry is set to grow by 3-4pc in 2010, having declined by 6pc in 2009. Growth will exceed 4pc in 2011 but a return to pre-crisis levels of growth remains unlikely, according to a new OECD report.

The Information Technology Outlook 2010 says that spending by governments and business is set to remain weak in the months ahead in OECD countries, with new investment in hardware or software unlikely in the short term.

Domestic consumption in emerging markets is helping to make up for the slack in the rest of the world. In China, for example, consumer spending on mobile and telecommunication services has picked up, driven by the move to third-generation mobile services and equipment.

The rapid growth of the online digital content industry continued in 2009, according to the report. The video games industry has roughly doubled global revenues since 2005 to exceed US$50bn in 2009.

Meanwhile, the music and films industries have yet to show they can limit overall revenue declines by turning to business opportunities over the internet. Growth rates are highest for online films, but from low levels, followed by online games, advertising and music.

Consolidation and apps

During the global economic downturn, firms tended to cut IT services costs across the board, but in the recovery more strategic activities have been maintained or increased, says the report. Companies are now focusing on consolidation and applications to maintain customers and markets.

The report also confirmed the trend of companies moving their production to lower-cost locations in OECD countries and Asian economies. The OECD-area ICT sector has shifted to services which now account for an average of 80pc of total ICT sector value.

China’s role as a production and sourcing location has intensified. In 2008, China’s ICT exports were only slightly behind the combined exports of the US, the EU27 (excluding intra-European trade) and Japan.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years