In-Depth

IT Spending Rebounds

The drought may be over, but some IT spending categories are faring much better than others

• By Stephen Swoyer
• 02/15/2005

According to market research giant International Data Corp. (IDC), worldwide IT spending reached $965 billion last year and should increase at a compound annual growth rate (CAGR) of 6 percent over the next four years.

That’s $1.2 trillion, in case you don’t have a calculator handy.

In the U.S., IDC projects that U.S. IT spending will reach $416 billion in 2005, an increase of 5.8 percent from 2004. Surprisingly, IDC says that IT spending in the U.S. will slightly underperform the rest of the world, with a CAGR of 5.9 percent.

"We remain optimistic about the U.S. and global IT opportunities for vendors, said Anne Lu, manager for IDC's Worldwide Vertical Markets research program, in a statement. "Banking, discrete manufacturing, and government stand out as the largest IT buyers. IDC believes vendors can continue to succeed in this market by selling solutions that can help industries solve their business challenges. In addition, vendors need to create efficient vertical market strategies to tackle the different pain points of various industries."

Elsewhere, IDC says that worldwide software spending should reach $213 billion in 2005, with the largest increases in the government and services industries. If this holds true, software spending will grow at about 7 percent, year-over-year. In the U.S., spending on software should, once again, slightly underperform IT spending in the rest of the world.

In 2005, for example, software spending is expected to reach $106 billion, good enough for yearly growth of 6.6 percent. According to IDC, the most voracious consumers of software will be services, discrete manufacturing and the consumer/home markets.

IDC had encouraging news for hardware manufacturers. The research firm says worldwide hardware market revenues will recover over the next four years, reaching $465 billion in 2008. Prime drivers will be spending in the consumer/household, communications and media, and government sectors.

Surprisingly, IDC says that spending on IT services will underperform the growth rate for all IT spending. This year, for example, IDC predicts worldwide IT services spending will reach $423.8 billion, good for year-over-year growth of 5.7 percent. Not surprisingly, the largest consumers of IT services are the banking, discrete manufacturing and government verticals. In the U.S., the IT services market will reach $180 billion this year, good enough for a yearly growth rate of 5 percent.