IT Markets Beat Expectations In First Half Of 2010: IDC

IT spending rebounded quickly in the first half of 2010, led by capital spending on new hardware infrastructure as businesses, governments, and consumers took advantage of a stabilised economy to work off pent-up demand for new PCs, servers, storage, and network equipment.

International Data Corporation (IDC) has raised its projection for annual IT spending in 2010 to $1.51 trillion, representing growth of 6% in constant currency. Hardware spending will increase by 11% to $624 billion, while software and services spending is set to rise by 4% and 2% respectively.

“The first half of 2010 was robust by any standards for the IT industry,” said Stephen Minton, Vice President - Worldwide IT Markets and Strategies, IDC. “PC shipments were strong, enterprise spending began to recover from the depths of the Great Recession, and consumers remained enthusiastic about new devices such as Smartphone’s. While the high growth rates recorded by many vendors in the first two quarters of 2010 are partly a reflection of how bad things were in the same period of 2009, there’s also no doubt that it partly reflects a very real swelling of pent-up demand for hardware replacements and upgrades.”

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Amongst mature economies, the US is set to record IT market growth of 5% this year, recovering from the 4% plunge in 2009. Western Europe, where economic recovery has been slower to materialise, is expected to post IT spending growth of 3% in constant currency, while Japan is on course for growth of 0.5%. The real strength of the IT rebound has materialised in emerging markets, however. Growth in China this year is now expected to reach 21% in constant currency, while other fast-growing IT markets include India (13%), Brazil (14%), and Russia (17%).

“Amidst the general sense of optimism that has accompanied results from the first half of this year, there are also reasons to be wary of excessive exuberance,” said Minton. “Our surveys indicate that businesses are still cautious about committing to new, long-term IT projects, and are still anxious about the possibility of a double-dip recession. Decision-making cycles remain long, and many enterprises have contingency plans in place for the next 12 months which could see more projects suspended.”

This caution is rooted in economic uncertainty, with many economists still concerned that the debt crisis in Western Europe, the waning of government stimulus spending ,and the persistently high levels of unemployment in mature economies, including the US, might yet translate into a double-dip recession in the second half of this year or the first half of 2011.

“We stand in the middle of two powerful and opposing forces,” said Minton. “On the one hand, the very real pent-up demand for new IT investment, which has driven the solid recovery in the first half of 2010 and which will hopefully continue into 2011. On the other hand, the potential loss of confidence in a global economy which remains extremely vulnerable to any further escalation of the European debt crisis or a deterioration in the U.S. stock market. The next three months will be crucial to determining which of these scenarios is more likely; in the meantime, IT vendors should plan accordingly by understanding the potential impact on their near-term revenues.”