Irish IT services spending to rise in line with EU

11 May 2006

Enterprise IT services spending in Europe will show sustained but moderate growth over the next five years, according to new data from Forrester Research. Irish spending is predicted to rise in line with this.

Total Irish IT services spending this year will amount to €422m, rising to €445m next year. It is predicted to hit the half billion euro mark in 2009 and will reach €565m by 2011 for a compound annual growth rate (CAGR) of 6pc, Forrester said. This matches the European CAGR of 6pc, with organisations set to spend €146bn on IT services by 2011.

Forrester covered the 25 EU countries as well as Norway and Switzerland for its report. The data shows that Ireland’s nearest current comparison in spending terms is the Czech Republic, which is set to spend €411m this year and will fall just short of €500m by 2009. However, Forrester’s findings suggest that Czech medium-term growth will be better than Ireland’s and it will slightly overtake Irish spending, with an outlay of €574m predicted for 2011 and a CAGR of 6.9pc over the next five years.

Of the large states, the UK looks likely to lead the way, with five-year spending predicted to grow on average by 6.9pc over the next five years, ahead of Spain (6.1pc), France (5.8pc), Germany (5.7pc) and Italy (5.4pc).

In general, and perhaps not surprisingly, many of the EU accession countries lead the way overall for predicted spending growth. Estonia’s IT services spending is forecast to rise by 7.7pc, followed by Poland and Latvia with 7.6pc. Slovenia and Slovakia follow with 7.3pc and 7pc CAGR respectively.

Forrester said that the IT services market will grow by 34pc over five years on the back of a “significant surge” in IT services buying between now and 2011. However, the impact on spending will not be as significant a figure because the firm said it expects continuing downward pricing pressure in several areas of the services market due to factors such as commoditisation and globalisation.

Financial institutions will account for just over a third of Europe’s IT services spending this year, Forrester claimed. Total IT services spending will amount to nearly €110bn in 2006, of which 35pc will come from the financial sector.

One trend highlighted in the report is the fast growth of strategy consulting services. “The demand for strategic consulting will move ahead in the coming five years, especially in the Nordic countries and Europe’s largest economies,” the report said. Spending on outsourcing consulting is the lowest in the project-based services category, with €2.4bn in 2006. This is not predicted to change, despite having the highest CAGR of almost 10pc. Technology buyers spend more than a quarter of their project-based budget on IT strategy consulting and this service will see a growth rate twice that for business transformation consulting, Forrester said.

By Gordon Smith