Worldwide IT spending will grow five percent this year driven by an improving global economy and the need for users to resolve infrastructure problems, according to market researcher IDC.
Growth is coming back to IT spending after two years of decline in 2001 and 2002. Last year, IT spending was up two percent over the previous year, beating IDC's 1.2 percent growth forecast, said IDC chief research officer John Gantz.
The five percent growth forecast is one percentage point above that of worldwide IT buyers recently surveyed by the research company, Gantz said. There is pent-up demand that buyers did not report and governments will likely spend more, he said.
US buyers expect a five percent IT spend increase, Western Europe foresees a two percent rise, their Japanese counterparts three percent and in Asia Pacific, without Japan, seven percent - resulting in a worldwide average of four percent.
While an improving economy and necessary infrastructure upgrades are the expected drivers for IT spending in 2004, other motivators listed by US buyers are more interesting, Gantz said. "What I like is new product innovation and customer demand," he said. New product innovation was listed by about a quarter of respondents, and customer demand by just under a third.
As spending picks up, IT departments are also less focused on cutting costs. "Cost cutting has finally moved down the stack," Gantz said. Users in the IDC survey described infrastructure and software as more of a priority for IT than cutting costs, he said.
IDC's forecast calls for worldwide IT spending to pass the $1 trillion mark in 2006 and hit $1,041 billion and $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. As the world's population ages, there will be a relentless need for IT to increase worker productivity, Gantz said. "We're not breeding fast enough to support ourselves," he claimed.
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 said. But vendors also have to adapt to buyers who are tougher and more judgmental than in the boom years, he said.