Uncertain future for European IT sector

The respected analyst group carried out a survey of 1,236 SMEs in the UK, France, Germany, Italy and the Netherlands and found that half expected IT budgets to remain flat. Although 30%, largely the top end of the SME sector, expects an increase, one in five expect budgets to fall.

Laura Calligarich, research analyst at IDC, said negative economic signals across Europe have hit SME business confidence and that they are affecting IT budgets. ‘These economic signals drive IT spending, and the negative signals across Europe coming from the top five economies are causing caution,’ she said.

Economic revival in the IT sector has been predicted by a wide section of market watchers, mainly US-based, recently and the survey will come as a blow to many suppliers. Calligarich added that a lack of understanding over the financial benefits of technology is to blame.

‘There are many technologies that businesses do not understand the real benefits of,’ she said.

This is especially true in the accountancy profession, where technology take up has been slow. US analysts have been predictably bullish over their IT growth predictions for 2003. Researchers from groups such as Gartner and Forrester are predicting European IT growth rates of between 5% and 6%, something that Richard Holway, director of Europe’s largest IT services and software analyst Ovum Holway, simply does not believe.

He said he talks on a regular basis to the CEOs of companies such as IBM and Sage. ‘When I ask these people their honest views about next year the consensus view is that if you make the same revenue in 2003 as you did in 2002 you will have been doing bloody well,’ he said.

Tony Kingston, marketing manager at IT reseller, Deverill, agreed the SME sector has been propping up the industry for some time, and said businesses are becoming more cautious about which suppliers they deal with.

Holway went on to say that the IT industry doesn’t have an emerging ‘killer’ technology such as the internet that will drive IT spend. ‘Anyone who believes this industry will grow by 5% next year is living in cloud cuckoo land,’ he said.

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