EMEA IT spends to rebound in 2011

MUMBAI, INDIA: Enterprise IT spending in Europe, the Middle East and Africa (EMEA) is forecast to rebound in 2011 and reach $795.2 billion, a 1.3 per cent increase from 2010, according to Gartner, Inc. However EMEA will be the only region to show a decline in IT spending in both 2009 and 2010, with enterprise IT spending forecast to total $784.8 billion in 2010, a decline of 2.1 per cent from 2009.

Peter Sondergaard, senior vice president and global head of research at Gartner, provided the latest outlook for the IT industry today to an audience of 3,300 IT leaders at Gartner Symposium/ITxpo 2010, which is taking place here through 11 November.

“This decline in IT spending in 2010 is placing EMEA as the slowest region to fully overcome the downturn,” said Sondergaard. “We expect Western Europe to record the worst decline in EMEA in 2010 (-3.3 per cent), and experience the slowest long-term growth rate with a compound annual growth rate of 0.8 per cent through 2014.”

The European sovereign debt crisis is heralding a period of austerity that is affecting the mature economies of Western Europe. Faced with increased market scrutiny of their public finances and hoping to avoid following in Greece’s footsteps, a number of other European countries, most notably the UK, have since followed suit and adopted public sector austerity measures of their own in an effort to scale back their public deficits and debt. “We forecast enterprise IT spending in government in EMEA to decline 2.8 per cent in 2010 and total $139.6 billion. It will exhibit slow growth through 2014 as the public sector continues to focus on bringing budget deficits under control during the next five years,” Mr Sondergaard said.

Looking forward, the ongoing drop in the value of the euro and the British pound should promote healthy export growth in Western Europe and with it, positive economic growth. Gartner analysts said as governments scale back their spending and social support, Western Europe is not expected to return to stronger enterprise IT spending growth until 2012.

In 2010, the computing hardware market is the only segment to return to growth in EMEA with hardware spending forecast to total $79.4 billion, a 4.6 per cent increase from last year. “We are seeing a rise in shipments across hardware due to the low volumes in 2009 and from organisations gradually returning their replacement cycles to a normal length,” Mr Sondergaard said. Of the hardware segments, storage was the least affected in 2009 and has the best overall outlook through to 2014, as storage capacity demands continue to grow exponentially. Server, printer and PC revenues will each suffer from migration to lower cost devices or configurations which will inhibit the spending outlook, particularly in Western Europe.

The IT services market continues to struggle in EMEA and will be the slowest to return to growth. It is forecast to decline 5.6 per cent and reach $234.0 billion in 2010. Unlike in the past where IT services spending showed relative resiliency in tight times, a risk-averse and cost-focused mindset is today broadly persisting. While a lot of efficiency can be won through a productive focus on controlling cost, the emerging problem is a lack of balance, which inhibits investment in changing the business through new strategies, productivity enhancement, and process and product innovation.

From 2012, Gartner predicts that enterprise software spending in EMEA will surpass growth in spending on hardware, and this trend will continue through 2014 as organisations begin a new software applications replacement cycle.