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IT Spending Slump Turning Around, IDC

For IT managers the multi-year slump in technology spending may be coming to end, that according to a new study from IDC.

IDC said it is seeing a significant increase in spending in the technology and telecommunications sectors.

IDC issued its IT Black Book for the third quarter of 2003 on Tuesday saying that it expects continued recovery in 2004. IDC said it forecasts worldwide IT spending in 2004 to grow by five percent to $916 billion, while it sees spending on telecom services increasing by four percent to reach $1 trillion.

IDC expects a pickup in technology spending in the U.S. and several emerging markets, but it also believes there will declines in Canada, Japan and Europe. IDC says it expects a recovery of IT spending in Latin America in 2004 of seven percent.

Within specific sectors, IDC said it saw data services exhibiting growth in the third quarter of 2003 and is expecting growth of 16 percent in 2004.

"Since the end of major combat operations in Iraq, the US economy and the IT market have been poised for an upswing," IDC economist Kevin White said in a statement. "There are signs that business investment is now rising," White added.

"While hardware revenues have been depressed by fierce price competition in spite of shipment growth, the gradual recovery in software and services spending will gather steam during 2004 as business confidence improves," IDC said.

"The telecom industry will finally return to increased equipment spending in 2004," said Ludovica Bruno, telecom analyst at IDC. "As the telecom winter gives way to a telecom spring, the rebound will reach 16.5% growth by 2007."

But IDC's study is more optimistic than another recent study issued by Merrill Lynch, which stated that IT spending may not pickup before the second half of 2004, or possibly even into 2005. Merrill Lynch senior technology analyst Steve Milunovich said in a research not that the third quarter rests of the 100 tech companies his firm tracks averaged a 9 percent gain in sales, and a 27 percent gain in profits.

However, recently released government economic statistics showed that businesses are spending more money on computer hardware, software and technology services. The government said the IT market is growing at an annual rate of more than 15 percent.

But a new survey conducted by CIO Magazine for its Tech Poll says that IT budgets will grow by 6 percent over existing levels during the next year. CIO interviewed 243 executives for its poll, and said chief information officers and their associates are seeing both profits and budgets stabilizing.

The CIO survey showed future IT spending remained flat in October and 41.4 percent of all respondents said they would increase spending, compared to 40.5 percent in September.

Every month CIO magazine along with Deutsche Bank Securities and Ed Yardeni, chief investment strategist, Prudential Securities Inc., surveys a panel of senior executives on current and future IT spending. In terms of title, 85 percent of panel members were CIOs and 15 percent were CEOs, COOs, presidents, or held other senior management titles.

And another study points to a recovery in IT spending in the small business sector. AMI-Partners said U.S. small business added 382,000 new employees and spent $86 billion in IT products and services over the past year.

AMI-Partners said IT spending grew by 11 percent compared with last year and the group identified Internet Infrastructure, Web services, wireless networking, data storage and security as areas where investment dollars are flowing.