Recent findings from one of the leading ICT market research firms, International Data Corporation (IDC), quantify what many people have suspected for some time: 2002 looks set to have been the worst year ever for the industry.
IDC says that the world-wide market for IT systems and services shrank by 2.3 per cent in 2002 and has declined by 3 per cent over the past two years. It is now worth $875bn world-wide. To put that into context, the IT sector has grown by an average of 12 per cent per annum over the past 20 years, said the firm.
Nevertheless IDC is confident that market conditions will improve next year, and this sentiment is shared by senior IT professionals in this country who, according to a poll carried out by the organisers of the ICT Expo exhibition and conference, expect business to improve next year.
IDC’s findings, published in November, are a product of the firm’s research presence in 43 countries around the world and surveys with leading business executives. Contributing factors to the slump were a 9.3 per cent reduction in the world-wide computer market which encompasses PCs, servers and workstations. Even worse hit was the world-wide storage market which shrank by 10.6 per cent. In fact, IDC does not expect storage revenues to attain 2001 levels again until 2006! The world-wide network equipment market also declined by 7.6 per cent as sales to telecoms service providers dropped sharply. In services, the average contract value dropped to a three-year low.
For 2003 IDC expects to see some sort of recovery but the firm is unable to produce a single forecast for the expected rate of growth because of the continued uncertainly about the international political situation. Therefore, it has produced two sets of figures: one that assumes there will be no ‘significant changes in the economic or geopolitical environment’ and another that fears the worst.
Assuming no major upheavals IDC expects that world wide growth will be 5.8 per cent next year and that the following years will show even faster rates of growth before tailing off towards the end of the decade.
Under these conditions growth in the US will be 4.4 per cent in 2003 led by renewed demands for servers, network equipment and security products and services. Storage and software sales will remain weak however.
In Europe, under the optimistic scenario, the firm expects IT spending to grow by 5.4 per cent followed by several more years of solid gains. Japan, Latin America and Asia Pacific will also grow sharply.
However in the event of another major stock market crash or a war in Iraq, the firm is projecting more modest growth of 2 per cent overall for next year. Thereafter, IT market growth rates would approximate to national GDP levels, it said.
Locally too there is a widespread realisation that 2002 was a dark period in the business lives of many in the IT sector. Leading executives (see page 60) from some of the largest vendor and reseller companies in the local market are agreed that market confidence remains low and that such investments as are taking place in IT locally are driven by productivity and cost-reduction agendas rather than by business expansion.
A survey of senior IT professionals, carried out jointly by ComputerScope and Irish Computer in advance of the ICT Expo conference and exhibition in April next year to assess the business confidence of IT users shows that there is some grounds for optimism in 2003.
From a sample of nearly 450 respondents, 74 per cent pronounced themselves confident or very confident about their business over the next 12 months. Although only a tiny minority (8 per cent) expected the ICT market to begin turning around in the first quarter of 2003, more than half (52 per cent) thought the turnaround would take place in the second or third quarters, with 22 per cent thinking that it would not take place until 2004 or later.
Also, nearly two thirds (63 per cent) of respondents thought that their company’s revenues would increase in 2003, although only about a third (37 per cent) expected their company’s spending on ICT to increase over the same period.
When asked what was the biggest barrier to their company’s growth, the most popular answer was ‘Lack of market confidence’, which was cited by 36 per cent of respondents. Next biggest factor was ‘Lack of customer demand’ cited by 31 per cent, and then ‘Lack of broadband’ cited by 13 per cent of respondents. Only 8 per cent thought that ‘Management commitment to ICT spend was the greatest barrier to their company’s growth and only a mere 4 per cent thought the same was caused by ‘Lack of a skilled workforce’.
Interestingly, the priority area for ICT spending among respondents varied greatly. Productivity is still the key area, cited by 22 per cent as being top priority. Next highest in terms of importance were e-business and service quality, each coming in at 16 per cent with networking being cited by 10 per cent of respondents as their biggest priority for investment.
And finally, it is perhaps illustrative of some renewed confidence that 36 per cent of respondents said that the sales and marketing function would be their key driver for ICT implementations next year. This compares with 30 per cent who said that operations would be the major focus; 18 per cent who said finance and 17 per cent who said customer service.
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