Cash-Strapped European Organizations See Almost Flat Growth in IT Services, Says IDC

MADRID — March 4, 2009 — IDC has lowered its European IT services forecast for 2009 by 2 percentage points, from 2.6% to 0.6%, as a result of the continued erosion of the economy. According to a forthcoming IDC study, the Western European IT services market will grow at a CAGR of 3.7% between 2009 and 2013. Looking beyond 2009, IDC anticipates a slow recovery to start only in the second half of 2010, with sluggish 2.2% growth.

In November, when we published our first "crisis response" forecast, the expected GDP for Western Europe for 2009 was roughly 0.5%. Only four months later, the GDP forecast for the region has fallen sharply to -2.5%, with all European economies expected to be in economic recession during 2009. Moreover, with business sentiment at a record low in Europe, organizations' non-discretionary spending will freeze, and this will impact approval of new IT projects.

Given the market uncertainty and the expected softening in demand in consulting and systems integration, IDC expects a decline of -1.4% in project-oriented activities for 2009.

''Many projects will be delayed, reduced in scope, or chopped into smaller pieces, but so far we do not expect many projects to be cancelled,'' said Laura Converso, research manager, IDC European Software and Services. ''Despite the delay in IT decisions, we believe projects aimed at risk management, MÀintegration, and further cost efficiencies are more likely to be approved. The outlook for manpower-based IT services is tough for the year ahead, with an expected strong reduction in both volume and billing rates. Although we expect pricing pressure to be high in outsourcing as well, we believe this spending stream is less cyclical than systems integration and consulting, and we anticipate 4.4% growth in this segment."

In 2009, cost cutting will be the primary motivation to outsource. Despite this, customer demand for a better quality of service will remain high, as will the tendency to opt for providers with better offshore service provision.

IDC forecasts that most IT deploy and support services spending will be cut to the minimum, and only "keep the lights on" spending will be maintained, resulting in a 2% drop in the segment; in addition, hardware shipments and software license rates are expected to decline sharply in Europe. IT training-related activity will see a reduction of -5% in 2009, due to its dependence on the cycle.

Despite sharp declines in projects and support during 2009, we expect more crisis-resilient sectors such as outsourcing to sustain IT services market growth at 0.6%. In addition, we see a post-crisis outlook in which SaaS offerings, cloud platforms, and global sourcing models emerge as the big winners.

The study, Western European IT Services Market 2008 and Forecast 2009-2013, will present a quantitative analysis of IT services spending by services foundation market and country. It will also include a qualitative analysis focusing on the key assumptions that IDC believes will shape demand for IT services between 2009 and 2013.

For more information, please contact your local IDC office.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For more than 44 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.

IDC is a division of IDG, the world's leading technology media, research, and events company. Additional information can be found at www.idc.com

M2 Communications Ltd disclaims all liability for information provided within M2 PressWIRE. Data prepared by named party/parties. Further information on M2 PressWIRE can be obtained at http://www.presswire.net on the world wide web. Inquiries to info@m2.com.

###