IT Market Is Still Recovering, But Volcanic Cloud Lingers Over Europe, According to Latest IDC Worldwide Black Book Forecast

FRAMINGHAM, Mass. – May 24, 2010 – 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.

"IT spending growth in the U.S. and emerging markets has been strong during the past two quarters," said Stephen Minton, vice president of Worldwide IT Markets and Strategies at IDC. "Some of this is down to easy comparisons with the same period a year ago, but it also reflects very real pent-up demand for infrastructure spending, including investment in solutions such as virtualization and information management. Just as capital spending on hardware is the first thing to fall in a recession, it's also the first thing to come back up for air when IT budgets are surfacing above water."

"There is still some caution in the market," said Minton. "Some businesses are wary about the sustainability of the economic recovery, and are holding off on some project-based spending and large, multi-year contracts. There is undoubted relief that capital spending and general IT budgets are up, but it's also clear that some weak spots persist."

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.

"Risky markets will remain volatile, despite the forestalled paralysis of the interbank lending market," said Anna Toncheva, program manager and economist in IDC's IT Markets and Strategies team. "There will be a period of intense exchange rate volatility as capital takes flight away from Europe into the U.S. bond market and depresses the euro. China will be less motivated to de-peg from the dollar and revalue the yuan. Production and supply chain decisions will be impacted by these developments."

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.

IDC's Worldwide Black Book provides new and updated forecasts for IT spending in 54 countries around the world. IT spending forecasts for the period 2006–2014 focus on 22 individual market segments across hardware, software, IT services, and telecom services for individual countries in all regions including North America, Latin America, Western Europe, Eastern Europe, Asia/Pacific, the Middle East, and Africa. The Worldwide Black Book Query Tool, Version 1, 2010 (Doc #223198) presents all data in the following exchange rate views: U.S. dollars in constant currency, annual and year-to-date exchange rates, and local currency.

About IDC

International Data Corporation (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 to make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. For more than 46 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 [http://www.idc.com].

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