2002: the worst year in the history of the IT sector

IDC says that 2002 saw the IT sector shrink by 2.3% to a worldwide sales figure of US$875 billion. 2003 is expected to be more positive though, with growth of more than 5% predicted.

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By  Neil Denslow Published  November 26, 2002

2002 has been the worst year in the history of the IT sector, according to IDC. The analyst house says that 2002 saw the sector shrink by 2.3% to a worldwide sales figure of US$875 billion. 2003 is expected to be more positive though, with growth of more than 5% predicted.

“Overall, the IT industry has contracted by roughly 3% over the past two years,” says John Gantz, chief research officer at IDC. “This is in sharp contrast to the average annual growth rate of 12% enjoyed by the industry over the past 20 years. Looking forward to 2003, we expect to see spending on IT and communications resume, driving a worldwide growth rate of 5.8% for the industry," he adds.

Among the black spots highlighted by IDC was a 9.3% reduction in the worldwide systems market, comprised of PCs, servers, and workstations. The global storage market also shrank by 10.6% in 2002 and IDC does not expect it to recover to its 2001 size until after 2006. The global network equipment market also fell 7.6%, mainly because of investment cutbacks by telcos. The services market, which represents over a third of the worldwide IT revenue, also slumped to a three-year low.

The analyst house expects IT spending to resume growth in 2003, but it remains cautious. Software spending is expected to remain weak, while price competition will stymie revenue growth in the hardware sector. The focus on smaller projects will also restrict growth in the services sector. After 2003, however, IDC expects several years of improved growth followed by slower growth towards the end of the decade.

However, the analyst house emphasises that changes in the wider economic and geopolitical environment, such as a stock market plunge or war in Iraq, could result in lower IT growth. In such a case, IDC predicts worldwide IT spending growth could be around 2%, with spending growth in following three years mirroring real GDP growth.

“Although the industry as a whole won’t return to the kind of growth enjoyed before the downturn, there will be a number of bright spots over the next several years,” adds Stephen Minton, IDC’s director of worldwide IT markets and strategies. “Innovation and value will be important drivers that lead the industry back to health.”

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