IDC predicts significant improvement in the IT market

IDC is predicting that IT spending will recover through 2002. The market rebound is primarily going to be driven by the improving economic conditions.

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By  Greg Wilson Published  May 4, 2002

Although the IT market has hit rock bottom in the last year, IDC is still optimistic about a recovery in 2002. The rebound is going to be primarily driven by the improving economic conditions in the US market.

However, IT spending will remain muted for the rest of the year, and only fully recover in 2003. Worldwide IT spending growth, which was flat in 2001, is projected to rise 4.7% in 2002 and to 9.6% in 2003.

“The ingredients for a technology rebound are falling into place,” says Kevin White, research manager of IDC’s Global IT Economic Outlook program.

“Recent data releases point to a faster-than-expected recovery in the United States economy. As business conditions firm we expect to see companies re-launch IT projects that were deferred in 2001,” he adds.

The analyst house is predicting significant improvement in the United States IT market over the next two years. IT spending in the United States is forecast to rise by 3.7% in 2002, reversing the 3.5% contraction witnessed in 2001. Growth is forecast to rise to 8.8% in 2003 as the economic expansion gathers momentum.

“Businesses recognise the potential for IT to reduce costs, expand revenue, and improve the bottom-line. But in the short-term, making these investments require funds that are often in short supply during a downturn. As the economy gathers steam and corporate profits improve, businesses will have the resources to invest in IT,” White comments.

“Historically, there is a strong correlation between corporate profits and technology investment,” he adds

Although the speed and intensity of the recovery will vary from region to region, IDC estimates robust growth in worldwide IT spending in 2003 and beyond. During 2001 negative cash flows constrained technology investment, however, this was only a temporary phenomenon, says IDC.

“The fundamentals underpinning IT demand are strong. New technologies, rising Internet usage, and the proven benefits of technology investment for business productivity will continue to drive healthy growth in IT expenditures for years to come,” White explains.

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