News

IDC: U.S. IT Spending on Track; Europe Slowing

• By Linda L. Briggs
• May 9, 2005

U.S. businesses are spending cautiously but steadily on technology this year, although oil prices, interest rates and currency fluctuations could slow IT spending worldwide.

That’s the news from IDC’s just-released quarterly worldwide spending report. IDC tracks IT spending on hardware, software and services in 54 countries.

Over the next 5 years, IDC expects the worldwide IT market to grow at about 6 percent compound annual growth rate. Emerging markets, including China, India and Russia, will show the biggest growth, according to Juan Orozco, an IDC senior analyst. Emerging economies in Latin America, such as Brazil’s, are showing steady growth. India in particular is booming, IDC reports, as is China, with a projected 9.5 percent growth in IT spending for the year. At that rate, China will become the second-largest IT market in the world by the end of the decade, overtaking India, Europe and Japan.

U.S. spending is expected to grow by five percent. Firms continue to increase technology budgets and begin new projects, especially around security, regulatory compliance, infrastructure management and business intelligence, the research firm says.

“It actually was not a bad quarter for IT spending,” according to Stephen Minton, an IDC VP for worldwide IT markets, “especially in light of where we’ve been in the last few years… The first quarter of 2005 has been broadly healthy for the global IT markets, and certainly better than some first quarters over the last few years.”

Europe’s worsening economic conditions will slow growth to 4 percent there for the year. “There does seem to be some anecdotal evidence that large firms are a bit more nervous, and starting to hold back on signing off on those big new projects,” Minton says.

That caution is echoed worldwide, as firms take less of a rebuild-the-infrastructure approach to IT projects. Instead, companies are tending toward a modular approach to new projects that reflects uncertainty about the economy and risk avoidance.

“We’ve seen a shortage of mega-deals,” Minton says, “but more of the smaller, more modular deals… Companies [are] spending on technology in a more cautious manner…as a reaction to threat.”

The majority of U.S. firms surveyed say they plan to increase IT budgets. The number of companies reporting planned spending increases has been inching up since mid-2003.