The tech slump is over: IDC

BANGALORE: The slump in tech spending is over says IDC and next year may well see the first major increase in technology and telecommunications spending, says a report from the research firm.

After two years of record declines and recession, the IT and telecom industries have gradually returned to positive growth in 2003, with continued recovery expected next year. According to the 3Q03 version of the industry-standard IDC Black Book, to be released this week, worldwide IT spending is set for five per cent growth to $916 billion in 2004, while spending on telecom services will show four per cent growth to $1 trillion.

"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 US is sustained, and the gradual improvement in international economies continues, we can look forward to a further uptick in IT spending expectations."

According to the new IT Black Book, which gathers IT spending data from 55 countries, total spending in 2003 will show a return to positive growth this year in the United States and emerging markets, although worldwide growth will remain inhibited by declines in Europe, Japan and Canada. While hardware revenues have been depressed by fierce price competition in spite of shipment growth, the gradual recovery in software and services spending will gather steam during 2004 as business confidence improves.

"The recent economic improvements will undoubtedly be good for many IT vendors, though growth will not return to dot-com heights," added Minton. "Pent-up demand within IT departments, particularly for mission-critical infrastructure, has reached unprecedented levels."

The recent report of rapid economic growth in the US, 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 US economy and IT market have been poised for an upswing," said White. "There are signs that business investment is now rising."