Software spending to pick up in 2003

Despite economic difficulties tied to accounting scandals and to the looming prospect of war on Iraq, revenue in the worldwide packaged software market will grow by around 4 per cent in 2003, after slower growth of around 1.5 per cent in 2002, according to IDC.

Applications such as operating systems and business software will be the largest area of spending in the software market in 2003, compared with 2002. Global spending on applications will grow to $US131 billion by 2006.

Meanwhile, application development and deployment promises to be the fastest-growing software segment through to 2006, growing 11.5 per cent annually, according to a statement released by IDC.

"Application development is something that has been put off for several years because of the recession. Companies have been saying, 'New tools for our developers? We can put that off.' But the emergence of Web services and XML-enabled tools to develop those services are a reason to buy those new tools." said Tony Picardi, senior vice president of global software at IDC.

Growth in the software market is expected despite the lack of any obvious "killer app" to stimulate development, said John Gantz, chief research officer at IDC's Global Research Organisation, during a conference call to discuss the IT forecast.

Despite a cautious environment among buyers of information technology, polls conducted by IDC showed a willingness to purchase necessary technology, according to Gantz. Chief information officers polled by IDC were optimistic about the prospects of the US economy and their own companies and expect to increase their IT spending about 6 per cent over the next year.

In the US, operations management, technology services, and software will be among the largest growth areas, percentage wise, in 2003, with the market for PCs and computer storage continuing to show little growth or shrink, according to IDC.

Outside of the US, the Asia-Pacific region is expected to see substantial growth in IT spending, with China and India predicted to be the largest markets for technology companies among emerging markets, according to statements made by IDC's Stephen Minton. Those two countries are expected to see growth rates of about 20 per cent in IT spending in 2003, from around 10 per cent growth in 2002.

"Growth in China and India has been slower as a result of the global economic slowdown, but it's beginning to pick up," said Minton.

"Companies in those countries are beginning to make more sophisticated use of their IT infrastructure. They've been buying PCs and servers and are beginning to implement IT departments -- things we take for granted in the US and Europe. We're expecting the growth rates in software in those countries to be higher over the next few years as companies find out how to make better use of their technology."

In addition, Minton named the Philippines, Vietnam, and South Korea as countries with fast-growing IT markets. In Eastern Europe, Bulgaria and Hungary were described as stable markets for companies looking to expand.

Despite the generally hopeful outlook, however, Gantz noted that factors such as the growing prospects for war with Iraq and corporate accounting scandals that are continuing to unfold could upset predictions for growth in 2003.

Those concerns aside, Gantz and other IDC analysts said that despite slow growth in 2003, technology spending will increase in coming years as companies look to technology to gain efficiencies in their business processes, as more and more households move to broadband Internet access, and as computing technology expands from personal computers to mobile computing devices and embedded computers.