IT Market Is Still Recovering, But Cloud Lingers Over Europe

Worldwide IT spending has rebounded strongly from the Great Recession, as many businesses take advantage of the general economic recovery to catch up with overdue spending on critical hardware infrastructure. Market data from International Data Corporation (IDC) shows capital spending on PCs, servers, storage, and network equipment soaring in recent quarters, producing strong year-over-year growth comparisons with the lowest period of the recession. Meanwhile, consumer spending on smartphones has continued to accelerate.

According to a new forecast from IDC, worldwide IT spending is set to increase by 3.8% this year at constant currency, to $1.47 trillion. Hardware will lead the way, with growth of 6.4% at constant currency, while software and services spending will increase by 3.1% and 1.5% respectively. Based on exchange rates from the first quarter of 2010, growth in U.S. dollars this year would be higher at 5.6%. This follows the decline in worldwide IT spending of 4.2% in constant currency last year (a decline of 7.3% in U.S. dollars).

In emerging markets like China and India, businesses and consumers are once again rushing to invest in new technology products and services to support their export-driven growth. In the U.S., government stimulus funding has provided a much-needed boost, which has trickled through to strong shipments of IT equipment. Additionally, U.S.-based IT firms received a boost from currency fluctuation in the first quarter of 2010, adding to the general sense of optimism which has accompanied recent earnings announcements.

One of those weak spots is Western Europe, where the current debt crisis in Greece has raised concern over the short-term prospects for the European Union. Even before that crisis reached its recent levels of alarm, the European economy and IT market were recovering sluggishly. IT spending in Western Europe is expected to be flat this year in constant currency, after plunging by 6.5% in 2009 (a decline of 13.5% in U.S. dollars). Representing almost a third of global IT spending, Western Europe is a hugely important market for technology vendors, and any further strains on the confidence of European businesses and consumers could cast a cloud over the outlook for the second half of this year.

Another weak spot for the global IT market is Japan, where the recovery in exports has not yet driven an increase in domestic consumption or investment. IT spending in Japan is expected to decline by 2.2% this year in constant currency, after the plunge of 11.1% recorded in 2009. Growth prospects elsewhere in Asia, though, are brighter; the IT market will increase by 13.7% in China, and by 13.8% in India. In 2011, worldwide IT spending is forecast to accelerate, growing by 5.5%, assuming a gradual recovery in Europe and Japan.

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