Tech Spending Expected to Jump
Imroving economy, user need will drive growth, researcher says.
Joris Evers, IDG News Service
SAN JOSE -- Worldwide spending on information technology will grow 5 percent this year, market researcher IDC says. The growth will be driven by an improving global economy and the need for users to resolve infrastructure problems, the researcher says.
Growth is coming back to IT spending after two years of decline in 2001 and 2002. Last year, tech spending was up 2 percent over the previous year, beating IDC's 1.2 percent growth forecast, says John Gantz, IDC Chief research officer, speaking at IDC's Directions 2004 event here this week.
Worldwide IT spending was $871 billion in 2002, according to a December IDC report.
Pent-Up Demand
IDC's 5 percent growth forecast for 2004 is one percentage point above that of worldwide IT buyers recently surveyed by the research company, Gantz says. There is pent-up demand that buyers did not report and governments will likely spend more, he says.
The survey shows that U.S. buyers expect a 5 percent IT spending increase, Western European buyers foresee a 2 percent rise, their Japanese counterparts see spending going up 3 percent, and in Asia Pacific without Japan 7 percent growth is expected, resulting in a worldwide average of a 4 percent increase, Gantz says.
While an improving economy and necessary infrastructure upgrades are the expected drivers for IT spending in 2004, other motivators listed by U.S. IT buyers in a recent survey are more interesting, Gantz says.
"What I like is new product innovation and customer demand," Gantz says. New product innovation was listed by about a quarter of respondents, and customer demand by just under a third, according to a slide shown by Gantz.
As spending picks up, IT departments are also less focused on cutting costs. "Cost cutting has finally moved down the stack," Gantz says. Users in the IDC survey described infrastructure and software as more of a priority for IT than cutting costs, he says.
Looking Forward
IDC's forecast calls for worldwide IT spending to pass the $1 trillion mark in 2006 and hit $1,108 billion in 2007.
After 2004, IDC expects growth to level, with 6.5 percent in 2005, 6.8 percent in 2006 and 6.4 percent in 2007, according to the December report, IDC's current worldwide IT spending forecast. An update is due out soon, a company representative says.
As the world's population ages, there will be a relentless need for IT to increase worker productivity, Gantz says. "We're not breeding fast enough to support ourselves," he says.
Growth won't automatically translate into sales for vendors. They need to switch from a marketing strategy aimed at just getting leads to one of getting their brand out again, Gantz says. But vendors also have to adapt to buyers who are tougher and more judgmental than in the boom years, he says.
IDC is a division of International Data Group, parent company of both PC World and the IDG News Service.
