European IT Market is Entering Initial Phase of Recovery, According to IDC’s Black Book

LONDON – AUGUST 14, 2002 – According to new Black Book data published by IDC, IT spending in Western Europe will grow by 4.4% in 2002 compared to 3.4% in 2001. This figure will rise to 6.2% in 2003 but is not expected to return to the healthy levels of growth seen in 2000 until 2004.


"With the first half of 2002 complete and no significant improvement in business conditions apparent, the chances of a near-term rebound in IT spending in Western Europe are slim. The recent drop in the European stock markets following accounting revelations in the US coupled with the much dreaded downturn in consumer spending have served to aggravate this already weak outlook," said Vicky Hawksworth, Senior Analyst in IDC's European IT Markets Center. "However IDC is upbeat about the underlying fundamentals and long-term prospects of the Western European IT market and believes the market is now entering the initial phase of recovery having reached its lowest point in the fourth quarter of 2001."

The Western European IT market has suffered a number of major setbacks over the past two years; first came the dot-com crash and subsequent repercussions, followed shortly after by the telecommunications slump and knock-on effect on the hardware market. Adding to these woes, the global economy then encountered a significant slowdown. Taking all these factors into consideration, the Western European IT market has proved relatively resilient and with the exception of the hardware market, all major segments have continued to grow.

Analysis of historic data illustrates a correlation between GDP growth and IT growth whereby spending patterns in the IT industry are typically influenced by fluctuations in the economy. Based on this assumption, a recovery in IT spending in Western Europe will be largely dependent on the stabilization of the economy and as such the pace at which IT market conditions improve will differ across geographies in line with the relative health of each economy. For example, France and the UK may find it easier to bounce back whereas a rebound in Germany, where economic conditions have been particularly challenging, could lag by a few months.

However, Hawksworth adds, "While an improvement in economic conditions will provide the basic foundations for recovery, a return to healthy IT investment will be hindered until business profitability ameliorates and the restrictions on corporate IT budgets are subsequently relaxed. This will be a gradual process and may take up six months to materialize; hence overall market conditions in Western Europe are not likely to start to improve noticeably before the first half of 2003."

All countries in Western Europe will report positive growth in 2002, with Ireland expected to bounce back from its 2001 decline. Sweden will enjoy the highest growth in the region, increasing by 8%, and Finland, France, Italy and the Netherlands will also see stable growth in 2002 at 6% each. Short-term forecasts show that investment in IT services will take priority in Western Europe but current advances in wireless and Web technologies will mean a shift towards higher levels of software spending in the medium to long term.

Data in this press release comes from IDC's Western European IT Spending Patterns: The European Black Book 2002 (IDC #A03J) and European Executive Market Watch, 2Q02 (IDC #A04J). These studies are available to purchase from your local IDC office.

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