IDC Sees More Strong IT Spending in 2006

Fueled by purchases that accelerated in the second half of last year, worldwide IT spending in 2006 will cruise upward at a healthy rate of 6.3 percent, according to IT market research firm IDC.

A report released today by International Data Corp., of Framingham, Mass., cited two main reasons for the trend: economic stability in the United States, Europe and Japan, and “continued robust growth” in emerging markets.

Software buys will grow at a rate of 7 percent, while hardware and software purchases will increase by 6 percent, according to the report.

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The 6.3 percent predicted growth rate for 2006 is down slightly from the 2005 rate of 6.9 percent. “IDC expects the upgrade cycle to weaken somewhat, leading to slightly weaker overall growth in 2006,” said Juan Orozco, program manager of IT Markets and Strategies at IDC.

“Were plateauing. The growth we predict this year is where we think it will be for the next three to four years,” Stephen Minton, vice president of IDC Worldwide IT markets, said in an interview.

But, he added, “Different markets are growing at different rates. Business intelligence, for example, is growing much faster.”

Minton said he does not expect a dramatic rise in IT spending from the anticipated release of Microsofts Windows Vista.

In the United States, overall growth in 2006 will be 5.8 percent, IDC said, a slight decline from the 6.4 percent expansion of 2005. The strongest growth will be in network equipment, outsourcing services and system infrastructure software, including security tools, according to the report.

The uptick in 2005 was the fastest growth rate since the feverish IT spending in the year 2000, Minton said, and spending was strong across all hardware segments: servers, PCs and networking gear. The healthy spending in 2005 led to better margins and revenue for systems vendors, he said.

Although the services business is increasing overall, sending work to low-cost countries tends to keep a lid on spending growth, Minton said.

The report predicts dramatic growth in IT spending in China, with a 14 percent increase, and India, with a 21 percent increase.

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