Mixed signals on IT spending for 2005


5 May 2005

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Worsening economic conditions saw some large firms holding back on major IT purchases, with the result that the western Europe IT market is now expected to grow by only 4pc this year, according to data in IDC’s Worldwide Black Book 2005.

Worldwide IT spending in the first quarter of 2005 largely kept pace with expectations as businesses continued to increase their technology budgets and initiate new projects centred on security, regulatory compliance, infrastructure management and business intelligence, IDC found.

While IT spending is forecast to grow by only 4pc in western Europe this year, in Japan IT spending will increase by just 1pc, while US technology spending is expected to grow by 5pc.

“The first quarter was broadly stable and brought solid results for many IT vendors,” said Stephen Minton, vice-president of worldwide IT markets at IDC. “There were some mixed signals in the US, however, and in Europe the worsening economic conditions began to impact IT spending towards the end of the quarter. We remain focused on the downside of expectations for Q2 and the rest of the year, with interest rates, oil prices and currency fluctuations all potential wild cards that could impact business confidence and investment.”

Over the next five years, IDC expects to see worldwide IT market growth slightly outpace nominal GDP growth. “The global IT market will expand at a compound annual growth rate of 6pc between 2005 and 2009,” said Juan Orozco, research manager, worldwide IT markets, at IDC. “Assuming economic stability, IT budgets should continue to grow in every region with emerging markets such as China, India and Russia exhibiting the strongest growth opportunities.”

IDC says global growth will remain relatively robust in 2005, although the economic performance of the major industrial economies will be uneven and this will worsen the existing global imbalances.

Anna Toncheva, programme manager and economist in IDC’s IT markets and strategies group, explains: “High oil prices and exacerbated protectionist pressures in the US and Europe recently raised the risks of abrupt currency adjustments and a further increase in US interest rates.

“Such a reversal in the economic environment will undermine IT spending plans and pose a threat to the stability of the IT market.”

By John Kennedy