Signs of life for tech spending, predicts IDC

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Technology spending is finally showing signs of life, according to market research firm International Data Corporation (IDC).

Based on its latest research, IDC is predicting IT spending in the US will increase 1.5 per cent this year over last year to $372 billion. During the next five years, spending is projected to increase at a modest compound annual growth rate of 4.9 per cent to hit $467 billion by 2007. Worldwide, IDC predicts that tech spending will rise 2.3% this year to $871 billion.

Overall, the manufacturing and financial industries are expected to account for almost half of IT spending. But the telecom industry is still suffering from overcapacity, while the networking industry has yet to recover from overspending in the 1990s.

?IT vendors across the board stand to benefit from the energetic spending plans of the largest companies within a vertical industry,? said Anna Toncheva, senior analyst with IDC?s Systems Vertical Views research service. ?Close monitoring of how the top 100 companies allocate their IT dollars will help IT vendors to spot the early signs of emerging demand for particular products within a vertical market and to prepare more focused marketing strategies and initiatives."

In particular IDC reckons there is potential for IT vendors able to tailor their products for specific vertical industries. For example, government spending is expected to be healthy over the next five years to meet initiatives for E-government and homeland security.

?Although cautiousness prevails, roughly one-third of all North American organisations are increasing their IT budgets in 2003,? said Lucie Draper, program manager for IDC's Enterprise Technology Trends programme.

?Although actual spending may be lower than budgeted, the attitude promoting investments is more than a function of the economic and business climate. Understanding companies' spending patterns will help vendors target and optimize opportunities. Despite a strong focus on cost reduction, a majority of respondents feel that a long-term vision and strategies for sustainable growth and competitive advantage are more important than a quick return on investment."

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