Putting on a happy face during gloomy economic times, IDC says corporate sales of computing equipment will experience a "moderate pickup" later this year and fully take off by the end of 2004.
The market research company, which employs more than 700 analysts worldwide, has struck out twice trying to predict when companies will beef up IT spending, which tanked following the Y2K bug frenzy in 1999 and the collapse of the markets in 2000.
Still, IDC remains optimistic that IT departments want to replace their aging computing gear, which in turn will help stimulate the economy.
"We are always very confident in our forecasts," said Stephen Minton, research director for the IDC Worldwide Black Book, a summary of the global IT market. "We are basing them on a conservative view of what's happening with the economy."
IT infrastructure providers -- both hardware and software makers -- have been hit hard in the last three years by declining sales and tanking stock values. They experienced a boom in 1999 when IT managers went on a shopping spree for new computers, software and IT staff for fear that a Y2K glitch would wreak havoc on their networks. But the economic doldrums that followed the dot-com crash forced IT managers to curb their spending and the industry continues to struggle.
In a survey of IT managers worldwide, IDC found that 28 percent of IT departments want to replace aging computing equipment. This is the main reason IDC believes that the market is poised to recover. But new equipment doesn't keep IT managers up at night as much as the thought of losing their jobs (38 percent), working with even smaller staffs and tighter budgets (35 percent) and completing projects on time (32 percent).
Nevertheless, IDC remains optimistic. With fears waning of a SARS epidemic in Asia -- fears which cost IT manufacturers in those countries $1 billion in potential sales -- vendors in those markets should see improvement, said IDC analyst Gary Koch.
In the United States, the stock market is slowly creeping up and oil prices have fallen because of the U.S. presence in Iraq, said IDC resident economist Kevin White. Also, while businesses remain cautious, both consumer and investor confidence are up, White said.
"We are encouraged," he said.
IDC analysts representing Canada, Western Europe, the Middle East, Africa and Latin America were not as optimistic. They said IT market recovery in their regional markets depends on the strength of the world economy and strong currencies like the Brazilian real and the euro. Analysts for the Middle East, Africa and Latin America also said that certain conflicts, like those in Iraq and Colombia, must be resolved in order to boost consumer confidence.
IDC expects worldwide IT spending to grow by 3 percent later this year, 5 percent in 2004 and 7 percent at the end of 2005.
This isn't the first time IDC has made such optimistic predictions. Late last year it forecast a 6 percent growth in IT spending in 2003. This revised a previous prediction of an uptick in IT spending in 2002 -- when the industry actually experienced its slowest growth rate ever, at negative 4 percent.
