RealTime IT News

IT Spending a Trillion Dollar Deal

Investment in IT continues to grow, closing in on $1.48 trillion by 2010, according to a new IDC research report.

The study, from IDC's worldwide vertical market research program, forecasts software spending alone will reach $327 billion by 2010, representing a five-year compound annual growth rate (CAGR) of 7.7 percent. Healthcare, communications and government are the three largest software markets sited by the report.

Hardware spending will reach $562 billion worldwide in the 2006-2010 timeframe, which IDC said represents a significant, rise led by volume servers, peripherals and storage, and networking equipment. The main drivers are strong spending from the home business and consumer, communications, and government sectors.

Rounding out the top three spending areas, IT services will reach $587 billion in 2010, which represents a five-year CAGR of 5.8 percent. IDC said the largest market opportunities in services are in government, banking, and discrete manufacturing.

Still, IDC points out there will be regional differences in how much growth can be expected.

"Regional dynamics can significantly impact top business challenges in different industries," said Anne Lu, program manager in IDC's Worldwide Vertical Market research program.

"IT vendors should look closely at the unique industry and regional trends and business challenges of each target market and then segment their customers based on these needs. This needs-based segmentation should help deliver a win-win solution for IT suppliers and their customers. Customers will get the strategic solutions they need – and subsequently buy more – and IT suppliers will in turn increase sales and profits."

Near-term, Merrill Lynch issued its own research this year that predicts IT spending will grow 4.2 percent in 2007, based on its survey of Chief Information Officers (CIOs). Merrill Lynch said IT spending finished 2006 up 3.4 percent, which was a dip from 4.4 percent spending in 2005.

Among the CIOs surveyed, Merrill Lynch said 72 percent intend to increase their spending with external providers this year. That's a big jump from last quarter's 46 percent figure and 58 percent a year ago.

Consultants and system integrators stand to gain if the Merrill Lynch survey results hold up, which pegs budget growth for consulting to increase 4.6 percent year-to-year. Merrill Lynch pointed to such vendors as Accenture and BearingPoint and the consulting divisions of global companies like IBM , EDS  and CSC  as standing to benefit.

Back in July of last year, the research firm Computer Economics noted that corporate IT spending was already on the grow. For 2006, Computer Economics said IT spending across all industry sectors in the U.S. and Canada, was two percent of revenue. The two percent ratio was an increase from 1.7 percent in 2005 and the highest the metric reached since 1997, during the build-up to Y2K, when it reached 2.2 percent.