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Outsourcing pushes up IT spending growth

Nick Huber
UK IT expenditure will top 6% in the third quarter, up from 4.7% last quarter, according to the latest Computer Weekly IT Expenditure Report.

And on a yearly basis, IT spending, driven by the public sector and increased demand for outsourcing, is expected to rise by 9% during 2004 to £71.7bn, the survey, produced by Kew Associates, predicts. This figure compares with 4.4% in 2003. The steady single-digit rise in IT spending is expected to continue until 2008.

The public sector is still leading the way, with a predicted increase of 5.7% this year, followed by the services sector (5.6%) and production (3.9%). However, from next year the unprecedented surge in public sector IT spending is set to slow, growing by 2%.

Organisations are spending the greatest proportion of their IT budgets on computer services, including outsourcing, consultancy, training and software support.

Spending on services is predicted to rise by 10.9% this year. From 2005 it will surpass the public sector as the dominant sector for IT spending. Within services, organisations are spending most on outsourcing, followed by online information services and education and training.

Spending on software is expected to rise by 1.7% over the year but spending on hardware is forecast to dip by 2.5%.

Large organisations with more than 5,000 employees will increase their IT spending by 5.4% this year to £30.7bn. But enterprises with fewer than 500 staff showed twice as much growth as larger concerns in the second quarter: 9.7% against 4.8%.

Spending by smaller companies is more erratic than that of larger firms and the differential in the first quarter was much smaller (5.2% against 4.6%).

Kris Wicka, managing director of Kew Associates, pointed out the quarterly cycle of accelerating and decelerating growth in SMEs. 

IT growth builds to a peak >>

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