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IT spending still in black

IT spending still in black

Despite all the current economic doom and gloom, spending slumps, job cuts and general misery emanating from the US, indications on the home front are nothing but encouraging by comparison.

According to analyst IDC, most of the IT industry's pain should already have been felt by the slump in PC sales for the last quarter of 2000, which saw sales fall by 12 per cent compared with the third quarter.

According to senior IDC analyst Logan Ringland, IT spending will continue to grow in 2001 despite ongoing uncertainty, building up to a significant recovery in 2002.

"There is no doubt that this year is going to be hard work," Ringland said. "But overall IT expenditure in 2001 will certainly not go into negative territory. By the end of the year we will have a newly elected Government and by 2002 we will be moving into replacement cycles."

In fact, reports from IDC in the US predict IT spending in Australia will grow more than 10 per cent in 2001. This figure is in tune with Gartner Dataquest's predictions, which place the growth rate of IT&T at 9.8 per cent until 2004.

Australian Computer Society president John Ridge is encouraging a counter-cyclical approach, saying IT companies should be consolidating their skills and focusing on technologies which offer significant business savings.

"There is no point adopting a siege mentality. Most of our spending contracts are aimed at our own market," Ridge said. "Local spending is the key to growth in many areas of the Australian economy."

However, Ridge confirmed that exports of Australian IT products and services were on track to play a significant role in the industry. "The general trend over the next five years should be that our IT exports will go from 5 to 30 billion Australian dollars," Ridge said. "We have a fantastic track record on innovation, and the exchange rate makes our technologies very attractive overseas."

In the short term, however, Ridge said he would like to see the Federal Government bring forward some of the spending proposals outlined in its Innovation statement released in January.

"The longer-term trend is that growth in IT spending is certainly very strong," Ridge said. "Within IT there is a hell of a lot of infrastructure spending that has to go on, but that kind of spending is lumpy by nature. The GST and things like Y2K cause lumps in spending."

Heather Brigstocke, senior analyst, IT&T Trends Asia Pacific, for Gartner Dataquest, believes short-term business improvement spending will be the key to continued growth in IT. "Australia is inexorably tied to changes in the US economy and the current slowdown in Australia's economy and talk of the ‘R' word is not helping," Brigstocke said. "IT&T spending by the corporate sector will be sensitive right now."

Despite a moderate overall outlook of 9.8 per cent calculated annual growth rate (until 2004) for Australia, and given high rates of saturation in some areas of IT&T, Gartner predicts a strong growth for IT services of 20 per cent calculated annual growth rate (until 2004).

The Australian IT channel should be further encouraged by opportunities in the region. The countries likely to exhibit stellar IT spending growth levels are India and China and other emerging nations in Asia, Latin America, the Middle East, Africa and Eastern Europe, where the current technology market is comparatively small but expected to explode.

According to IDC, India's overall technology expenditure will grow by around 28.5 per cent this year, while China's total IT spending will rise by approximately 30 per cent. In India this year, IDC predicts hardware spending to rise by 29 per cent, software spending by 30 per cent and services spending by 28 per cent.


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