IDC Puts Its Weight Behind Growing IT Recovery

Analyst firm says the waiting is over: IT spending is about to come back into line after two horrible years of IT budget declines.

IDC says the waiting is over: IT spending is about to come back into line after two horrible years of IT budget declines.

In the heady days at the end of 2000, IDC continued to issue bullish quotes on how the PC markets of AsiaPacific, Europe, and the U.S. were still growing, just when the bottom fell out of those very markets. Given that this miscalculation was one of the key turning points that took the IT industry into recession, it’s tough believing that IDC would get the move back into growth right either.

But IDC on this occasion has been beaten to the punch by most of its competitors and most financial indicators within leading technology companies themselves.

IDC now produces so-called its Black Book, and for the Third Quarter 2003 results due to be released, IDC says worldwide IT spending is set for 5 percent growth to $916 billion in 2004. Its similar treatment of telecom services suggests a 5 percent growth (to $1 trillion) in 2004, and 6 percent the following year.

"Our forecasts are based on a relatively conservative set of economic assumptions," said Stephen Minton, IT spending analyst at IDC. "If the recent announcement of surging economic growth in the U.S. is sustained, and the gradual improvement in international economies continues, we can look forward to a further uptick in IT spending expectations."

The new IT Black Book process used at IDC gathers IT spending data from 55 countries. Spending in 2003 will be in positive growth in the United States and emerging markets. Worldwide growth remains inhibited by declines in Europe, Japan, and Canada.

IDC says that hardware revenues have been depressed by fierce price competition, so, in fact, shipments (but not revenue) may be up. Now the gradual recovery in software and services spending is set to gather steam, it says, during 2004.

IT departments have a lot of pent-up demand and Rethink Research Associates has noted in financial assessments that infrastructure companies have been on the way back since the first quarter’s results. IDC now concurs.

The recent report of rapid economic growth in the U.S., exceeding most expectations, will also translate into a positive impact on IT spending, according to IDC economist Kevin White. "Since the end of major combat operations in Iraq, the U.S. economy and IT market have been poised for an upswing," said White. "There are signs that business investment is now rising."

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