IT spending depressed for rest of 2003

IT spending in Western Europe will increase by only 0.5% this year, forecasts IDC. It expects the gloomy forecasts and tight budgets prevalent in the first half of 2003 to continue in the second half of the year.

However, the research company says things should improve next year. It expects growth of 3.7% in 2004 accelerating to 6.1% in 2005.

“Stronger than anticipated PC and server sales in the first quarter of 2003, driven principally by healthy SMB [small and medium-sized business] demand and the emergence of some essential renewals, have raised expectations for year-end growth,” says Vicky Hawksworth, research manager in IDC’s European IT markets centre. “However, vendor results suggest little tangible upturn so far this year in the domain of software and services.” These markets represent 64% of the total Western European IT market, so will pull down the 2003 growth figure for the whole industry, she says.

One country, however, looks set to avoid the spending lull. Spain, says IDC, will spend 9% more in 2003 than in the previous year. “The remarkable resilience in Spain can be largely attributed to its fast improving PC and server market conditions,” says Elsa Opitz, research analyst at the European IT markets centre. “Revenue derived from sales of hardware systems is forecast to record year-on-year growth of 10% in 2003, while the SHDs [smart handheld devices] market will almost double in size this year.”

Some sectors also look set to perform better than others. Spending on SHDs in Western Europe, for example, will rise by a massive 79% because of the increased use of mobile communications and because of the new converged devices flooding the market.

This is only a small sector, but its growth figure is so great that without it, the overall figure for the IT market in Western Europe would fall to -0.3%. Another sector set to outperform most others, according to IDC, is multifunction peripherals (MFPs). Here it forecasts spending growth of 27% in 2003.

Poor performing sectors include standard printers, which IDC forecasts will fall by 3% in 2003, and remain flat for the next two years. Sales in this sector will decline as buyers opt for MFPs instead.

Another sector facing decline is high-end enterprise servers. IDC expects spending in this sector to fall by 14% in 2003 compared with the previous year. The research company says this is because buyers are choosing lower end servers, thus reducing the overall value of server sales.

  • Tight control on spending is also affecting sales in the US, where companies spent only 90% of their IT budgets in June 2003, according to the Gartner Technology Demand Index, which polls 20,000 IT decision-makers in small, midsize and large companies to compare actual spending with budgets.

    “Continued economic weakness and uncertainty have resulted in a situation where, in general, recovery has been slow to materialise,” says David Hankin, senior vice president and general manager of Gartner. “IT decision makers appear to be holding a firm line on budgets, keeping current spending below their budgeted expenditures.”

    No one sector stands out to indicate a key area for recovery. The networking and telecommunications sector shows the highest spending compared with budgets, at 93.19 on the index, followed by hardware (88.03), software (84.25) and IT services (80.94). (A score of 100 would mean businesses spent exactly what they had budgeted for the month.)

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    Ben Rossi

    Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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