Global IT spending to hit US$2.6 trillion

Global IT spending is expected to grow rapidly over the next five years, from a projected US$1.4 trillion this year to over US$2 trillion in 2003, according to the latest report from SPS (Strategic Planning Services)/Spectrum Economics Inc., an economic consulting firm in Palo Alto, Calif.

By 2005, worldwide spending for IT products and services will reach US$2.6 trillion.

In a recent study entitled Global Economic and Information Technology Market Forecasts, 2000-2005, SPS/Spectrum said global industry and governmental annual spending for IT will increase at a steady 13 per cent compound annual growth rate between now and 2005.

Regionally, the report predicts that the fastest-growing regional IT markets will be Latin America and Middle East/Africa, followed by North America, Asia/Pacific and Europe, said Richard Carlson, chairman of Spectrum Economics.

“The fastest growing region is Latin America,” Carlson said. “There’s a certain stage that an economy hits where you have to massively computerize if you want to make the next (economic) jump, and that’s where they are; they are building the IT infrastructure of a modern economy.”

The other region experiencing fast IT growth, Middle East/Africa, is a nascent market whose current installed base of IT products and use of IT services is very low.

In Asia, the fastest growing markets are India and southeast Asia, he said. Japan topped the list for slow IT growth globally, however. Carlson noted that Japan has an “abysmal economy and (is) still surprisingly backward in a lot of key IT areas” such as the Internet and telecommunications.

The market segments that will experience the fastest growth are data communications, information services and software products, according to Carlson. Data communications is key because using networking products to tie systems together makes them more productive, he said.

“The hardware is still ahead of the software (in terms of performance), and every significant organization has got more hardware capacity” than they can use, Carlson said. “Data communications, better software and better services are how you get more bang for what you’ve already bought in terms of hardware,” he added.

IT spending was broken down into five categories: information services, software products, equipment services, equipment and data communications.

This year, services spending will reach US$4.5 billion, US$2 billion will be spent on software products, and US$2 billion for data communications. In 2005, however, US$8.9 billion will be spent on information services, US$4.3 billion will go toward software products, and US$4.5 billion for data communications.

Meanwhile, International Data Corp. (IDC) pegged worldwide IT spending to reach US$975.5 billion this year. SPS/Spectrum attributes the discrepancy between their figures and IDC’s to different product and service definitions and different economic, business or IT growth estimates, which may be more conservative. IDC’s figures were culled from 25 product and service segments in 54 countries, while SPS/Spectrum studied 14 categories of IT spending in 35 countries, five regions and two sub-regions (western Europe and central/eastern Europe and central Asia).

The SPS/Spectrum study tracked and forecasted three economic indicators, GDP (gross domestic product), inflation and unemployment, and 14 IT spending categories, including data communication, equipment, equipment services, application software products, systems software products, professional services, outsourcing, network services and systems integration services.