Worldwide spending on IT products and services is expected to increase 4 percent in 2003, with U.S. spending projected to increase 3.6 percent, according to a new report by Aberdeen Group.
Aberdeen's global IT spending forecast for 2003 puts total worldwide IT spending at $1.26 trillion and projects it to reach $1.44 trillion by 2006. However, the report notes that overall long-term growth projected at a compound annual growth rate (CAGR) of 4 to 5 percent worldwide and 5 to 6 percent in the U.S. will be less than experienced in the late 1990s, limited by gross domestic product (GDP) growth and top-line corporate revenues.
"The catalysts for technology spending growth have undergone a fundamental change," said Hugh Bishop, Aberdeen senior vice president and author of the report, "Worldwide IT Spending 2003-2006: Measuring the Incremental Recovery." "Top-line revenues, capital spending levels, and national economic health now dictate IT purchases. As a result, industry growth will be more incremental and tied to basic business principles."
The report also indicates that North America leads all other regions in projected 2003 spending, followed by Europe and Asia Pacific Rim. IT spending growth from 2003 to 2006 in these three leading regions will be led by Asia Pacific Rim at a CAGR of 6.5 percent, followed by North America at 4.9 percent and Europe at 2.6 percent.
Among Aberdeen's other key findings are:
- The factors contributing to excessive growth in the late 1990s are not repeatable. These elements included corporate retooling around Y2K issues, the Internet/e- commerce euphoria phenomenon, excessive venture capital investment in dot- coms, traditional enterprises accelerating e-business deployments to match the dot-com threat and unsustainable IT spending in the telecom sector.
- Long-term IT spending is gated by GDP growth and corporate revenue growth. IT spending now accounts for 3.88 percent of the world GDP and 4.42 percent of the U.S. GDP.
- China's importance will dramatically increase. Aberdeen expects that China will vault from the sixth largest market for IT products and services (in 2002) to the third largest market by 2006, surpassing the Germany, U.K., France and Italy.
- Software and services spending gain at the expense of hardware. Worldwide hardware expenditures will increase a total of only 8.3 percent from 2002 to 2006, while software and services will increase 27.2 percent and 17.7 percent, respectively, over the same time period.
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