News

Aberdeen: Watch for small IT spending boost in '03

• By John K. Waters
• December 30, 2002

As the tech downturn drags into its third year, one question that's bound to be on every software vendor's mind this week is: What's the outlook for IT spending in 2003? At least one group of industry watchers is forecasting a -- relatively -- happy New Year.

According to a new report by analysts at the Boston-based Aberdeen Group, worldwide spending on IT products and services will increase 4.0% in 2003, with U.S. spending projected to increase 3.6%.

The newly published report, Worldwide IT Spending 2003-2006: Measuring the Incremental Recovery , pegs total worldwide IT spending in 2003 at $1.26 trillion and projects it to reach $1.44 trillion by 2006. However, the report notes that overall long-term growth -- projected at a compound annual growth rate (CAGR) of 4% to 5% worldwide and 5% to 6% in the U.S. -- will be less than that experienced in the late 1990s, limited by gross domestic product (GDP) growth and top-line corporate revenue.

''The catalysts for technology spending growth have undergone a fundamental change,'' said Hugh Bishop, Aberdeen senior vice president and author of the report. ''Top-line revenues, capital spending levels and national economic health now dictate IT purchases. As a result, industry growth will be more incremental and tied to basic business principles.''

The report also indicates that North America leads all other regions in projected 2003 spending, followed by Europe and the Asia-Pacific Rim. IT spending growth from 2003 to 2006 in these three leading regions will be led by the Asia-Pacific Rim at a CAGR of 6.5%, followed by North America at 4.9% and Europe at 2.6%.

Among the report's other findings:
* The factors contributing to excessive growth in the late 1990s are not repeatable. These elements included corporate retooling around Y2K issues, the Internet/e-Commerce euphoria phenomenon, excessive venture capital investment in dot.coms, traditional enterprises accelerating e-business deployments to match the dot.com threat, and unsustainable IT spending in the telecom sector.

* Long-term IT spending is gated by GDP growth and corporate revenue growth. IT spending now accounts for 3.88% of the world GDP and 4.42% of the U.S. GDP.

* China's importance will dramatically increase. Aberdeen expects China will vault from the sixth largest market for IT products and services (in 2002) to the third largest market by 2006, surpassing Germany, the U.K., France and Italy.

* Software and services spending gain at the expense of hardware. Worldwide hardware expenditures will increase a total of only 8.3% from 2002 to 2006, while software and services will increase 27.2% and 17.7%, respectively, over the same time period.

A complete copy of the report is available for a fee from the Aberdeen Web site at http://www.aberdeen.com.