IDC Pinpoints IT Spending Hot Spots

Even as the global economy struggles, some vertical markets are on a relative spending spree--good news for technology vendors looking for customers with fat wallets. The IT market for manufacturing, for instance, will grow to $225 billion by 2007, said Anne Lu, senior research analyst for IDC.

Lu's "Worldwide IT Spending Forecast by Vertical Market, 2002-2007" study outlined current and future spending patterns in four regions--North America, Western Europe, Asia, and the rest of the globe-eight IT segments, and 17 vertical industries in an attempt to put numbers to spending on hardware, software, and information services.

"The worldwide economy ended 2002 much weaker," Lu said. "As a result, IT budgets were negatively impacted as the year progressed, and industries struggled to manage costs and meet profit goals. However, certain vertical markets still present bright IT opportunities."

Even so, the days of double-digit growth in IT spending-the trend during the decade prior to 9-11 and the economic downturn--are a thing of the past, she said.

"No vertical market will show a double-digit growth rate between now and 2007," Lu said. "We won't see that happening for at least the next 10 years."

Currently, IDC forecasts that IT spending will increase by approximately 4 percent, compounded annually, over the next four years. By then, Lu said, the total IT global spending will amount to a staggering $1.12 trillion.

The biggest overall spenders, said Lu, will be banking, discrete manufacturing-- firms that assemble products from pre-made parts, such as auto manufacturers--and government. The first two, in fact, will account for a quarter of all spending worldwide during the next four years, with manufacturing at 13 percent and banking at 12 percent.

Government has been a bright spot in IT spending worldwide recently, particularly in the U.S., as the federal government continues to expand the Department of Homeland Security, beef up anti-terrorism efforts, and generally enhance overall security technology. It will remain the market with the largest potential for growth.

"It will continue to offer brighter growth potential than other vertical industries," Lu said. "Government is just not as susceptible to economic conditions as the private sector." Her forecast estimates that global government spending on IT will surpass $126 billion by 2007, and account for nearly 11 percent of all IT expenditures.

Shifting strategies to pinpoint government, however, is notoriously difficult for vendors inexperienced with selling to the public sector. The labyrinth of contacts and contracts makes it tough for companies to step into the market and succeed.

Software vendors eager to tap into the fastest-growing markets should target healthcare, construction, and the general-services market, according to IDC. These three spenders will burn through some $87 billion in 2007, Lu said.

IT spending in hardware will climb fastest in the consumer, education, and communications/media markets, the report said. Included in communications/media is the telecommunications industry, which, while still stuck in the doldrums, is expected to drop some serious dollars on IT in 2005 and 2006, noted Lu.

"When a market like telecommunications is hit heavily in a recession," she said, "they typically bounce back faster than industries that haven't been hit as hard. We expect that by the beginning of 2006, telecommunications will be investing heavily in new infrastructure."

On the IT-services spending front, Lu said that banking, insurance, and utilities industries will be the best opportunities for vendors pitching to fast-growth markets, and will account for $162.3 billion in technology purchases.

This story courtesy of TechWeb.