IDC: IT spending has bottomed out

IDG News Service - After two years of watching IT spending grind to a near halt, IDC has a new economic outlook that predicts that purchases of things such as network equipment and software will stabilize in 2002 and crawl back to reach pre-2001 growth rates by 2006.
The worst is over for most sectors of the IT industry in most regions around the globe, analysts said yesterday during a conference in Santa Clara, Calif., at which IDC detailed figures from a lengthy report on the health of markets by geography and industry.
In 2002, worldwide IT spending growth will return, although it will be nowhere near the 11.5% growth in spending that Framingham, Mass.-based IDC recorded in 2000. By 2005, the rate of spending growth is pegged to reach 10%.
However, IDC had a cautious take on the predicted recovery. For example, PC sales will continue to decline, and IT spending in Europe and Latin America remains uncertain because of weak economies. IDC warned in its report that politics, the threat of war and a weak global economy hold IT spending teetering on a thin edge, according to research director Stephen Minton, who summarized the report at IDC's IT Spending Outlook conference.
In a worst-case scenario, spending could decline again this year, with a recovery delayed until 2004, he said.
The sale of software and related consulting services is expected to lead IT spending back into positive territory, IDC said. Front-office software and security software are poised for the biggest gains. By 2006, software sales should show 10% year-over-year growth. The IT services market will grow alongside software, IDC said, as companies seek help implementing applications that manage server consolidation or those built around Web services.
Sales of storage hardware are also poised for growth, but it's one of the few bright spots in the overall worldwide hardware sector, which suffered declines of more than 20% in 2001, according to IDC. "2002 hasn't been a whole lot better," Minton said. "The rate of decline is less, but there is still a double-digit decline."
Meanwhile, the PC market shows no sign of recovery and isn't expected to return to pre-2001 growth levels by 2006. Although shipments are expected to increase, revenue from the sale of new PCs will still be less in 2003 than in the previous year. PC sales could again show a year-over-year decline as steep as 12% in 2004 due to saturation of the market, IDC said.
Regionally, spending on IT in China and India is expected to show the most

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