European businesses and the public sector may be starting to spend on IT again, but the picture is not uniformly pretty, with some industries still largely interested in cutting IT costs, according to the latest research from IDC.

Researchers say demand for IT is beginning to make a comeback after years in the doldrums - for example, Gartner said this week, it expects 220 million PCs to ship worldwide in the next two years, largely as replacements for machines with outdated operating systems. But demand is not spread evenly across all industries in Western Europe, and different industries are using IT toward different ends, IDC said.

Manufacturing industries, particularly process manufacturing - which makes petrol, minerals, chemicals and the like, based on mixing or chemical reactions - is returning to moderate growth after a major downturn in IT spending, though discrete manufacturing (as opposed to process) will still show a slight decline this year, IDC said. But what investment there is in this sector will be in a context of cost-cutting, the firm said.

Meanwhile other industries such as banking are moving ahead with development of new applications and systems, while telcos are interested in effectively integrating their systems. "Banks will show positive patterns of growth, while the 'other' finance sectors will recover strongly to four percent growth in IT spending," said Giuliana Folco, IDC's research director for European vertical markets.

She said the public sector would continue to grow, with the healthcare industry reaching similar growth rates to those of local government agencies. The utility and business services sectors will grow at an above-average clip, as they have done, she said.

Worldwide IT spending will grow five percent this year, driven by an improving global economy and the need for users to resolve infrastructure problems, IDC said last month. 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.

US buyers expect a five percent IT spend increase, Western European buyers expect 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, US buyers also listed product innovation and customer demand as motivators, IDC said. IT departments are also less focused on cutting costs, the survey found, with infrastructure and software becoming more of a priority.

"Cost cutting has finally moved down the stack," said IDC chief research officer John Gantz.