The worldwide IT industry will suffer a 2.3% drop in revenue of
this year, the largest decline ever according to market research
group IDC.
The researchers predict the total worldwide IT industry revenue
this year will contract to $875bn (£559bn), a figure lower than
forecasts made as recently as August when total IT revenue for the
year was expected to remain above $900bn.
The analysis was derived from IDC research in 43 countries as well
as surveys of business executives.
This year's revenue drop combined with a decrease last year means
the IT industry has shrunk by 3% over the past two years, said John
Gantz, chief research officer at IDC. This compares with an average
annual growth rate of 12% in the IT industry over the past 20
years.
Looking forward, IDC said IT spending was expected to pick up,
driving a worldwide growth rate of 5.8% in 2003 with European
growth at 5.4%.
Major areas of decline this year include a 9.3% reduction in the
worldwide systems market, which includes PCs, servers and
workstations. In addition, the worldwide storage market sees a drop
of 10.6% in 2002, while the worldwide network equipment market
suffers a 7.6% decline as sales to telecommunications service
providers havedropped sharply.
The services market, which represents more than one-third of total
worldwide IT revenue, has been hard hit, with the average contract
value falling to a three-year low, IDC said.
Although IDC expects IT spending to resume growth in 2003, it
cautioned against unrealistic expectations in specific sectors.
Software spending, for example, will remain weak, and price
competition will inhibit revenue growth in the hardware sector.
Growth of services will be restricted as companies invest in
projects that are smaller in scope than in prior years.
Beyond 2003, IDC expects growth rates to improve for several years
followed by slower growth later in the decade.
IDC also emphasised that significant changes in the economic or
geopolitical environment, such as a prolonged war in Iraq or
another plunge in the stock market could result in lower growth
rates for IT spending.
As a result of this uncertainty, IDC for the first time produced an
alternate "downside" forecast. Under these more negative conditions
worldwide IT spending growth next year would be closer to 2%, IDC
said.