'Moderate' Growth Predicted In Global IT Spending

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January 24, 2005 (3:13 PM EST)

By Antone Gonsalves , TechWeb Technology News

Global information technology spending is expected to increase at a healthy clip through 2008, driven by an improving economy that's expected to boost corporate revenues, a market research firm said Monday.

IT spending is expected to increase at a compound annual growth rate of 6 percent, reaching $1.2 trillion by 2008 from $965 billion in 2004, International Data Corp. said. In the U.S., IT spending is expected to reach $416 billion in 2005, an increase of 5.8 percent from last year.

Through 2008, spending in the U.S. is forecast to increase at a CAGR of 5.9 percent to $501 billion.

While no longer experiencing the double-digit growth of the 1990s, the IT market has settled in to "moderate" expansion expected from a mature industry, IDC analyst Anne Lu said. Companies appear to be loosening their purse strings, because of an improving business climate reflected in recent gains in nations' gross domestic product.

"It's quite encouraging that business worldwide is improving," Lu said. "IT spending relates directly to the health of industry and the health of the economy. When you start to see industry reports of positive revenue growth, it's an early sign of an upswing in IT spending."

In the U.S., financial institutions, government and discrete manufacturers are expected to spend the most on IT, Lu said. In Western Europe, banks are expected to spend even more than in the U.S., in order to meet new mandates from the European Union.

In developing countries in the Asia Pacific region, the wireless communication and media industries are expected to be the spending leaders, Lu said. In mature countries like Japan, Singapore, South Korea and Australia, the leaders are expected to be discrete manufacturers and the services industry, which include business service providers, consultants, law firms and other businesses.

In discrete manufacturing, companies are expected to spend money on technology to drive supply-chain efficiencies, such as on better networks, communications and logistics, Lu said. Product lifecycle management is also expected to be a hot area.

Among separate technology sectors, software spending worldwide is expected to reach $213 billion this year, which is 7 percent more than last year, IDC said. In the U.S., spending is forecast to reach $106 billion this year, a 6.6 percent rise.

Worldwide purchases of IT services are expected to reach $423.8 billion this year, an increase of 5.7 percent over 2004. In the U.S., year-to-year spending is expected to increase 5 percent to $180 billion this year.