U.S. corporate technology spending is moving into a new stage of recovery as demand for computers and network essentials leads to outlays for software and services, International Data Group (IDG) said.
Stephen Minton, director of worldwide research for IDC in Framingham, Massachusetts, said a recent survey of 1,000 U.S. businesses led his firm to boost its 2004 outlook.
"We are now looking at a worldwide IT (information technology) environment growing at 8 percent this year. That's up from the 5 percent in December," he said.
Mr/ Minton cited strong fourth-quarter corporate sales of PCs, especially notebook computers, server computers used to manage networks and applications and network gear to pipe traffic to users as key factors in IDC revising its forecast upward.
"All of those things have exceeded our expectations," he said.
The anticipated rebound in technology spending is led by the United States and China, while Europe and Japan lag with expected growth of around 5 percent in 2004, IDC said.
Mr. Minton said a quarterly IDC survey conducted in mid-January of technology spending outlooks at 1,000 businesses found "a solid 45 percent now say an annual increase is likely in the coming year."
That's up from 40 percent of corporate buyers in a similar survey in the third quarter of 2003 who said they were unlikely to increase technology spending in the next 12 months, according to IDC.
Survey participants cited recovered corporate profits as their number one reason and a need to replace the aging nuts and bolts of their technology systems.
Upgrading essential hardware is the primary focus of 30 percent of corporate buyers. That's closely followed by 27 percent targeting spending on software and services, up from 15 percent a year ago and 5 percent at the bottom of the downturn in 2002, according to the survey.
Cost-cutting remains a high priority for one-fifth of those surveyed, down from a year ago when it was the top concern.
Asked what equipment they wanted to replace in 2004, more than 50 percent cited personal computers and central server systems. Software applications and network equipment were due for upgrades in 2004 by 40 percent of those surveyed.
IDC said customer-relationship management (CRM) systems were back in vogue with 27 percent looking to spend on them. CRM suppliers such as Siebel suffered from a reputation of over-selling the merits of their software in the tech boom, but demand is picking up again, Minton said.
Nearly one-quarter of respondents said they aim to spend more of their total tech budgets on wireless local networks.
Looking ahead, Minton said IDC forecasts sustainable growth of 6 percent to 7 percent. "We think by 2005, we will be on a steady growth trajectory," he said, but added that growth in percentage terms is apt to be half of low-double-digit 1990's "tech-boom" levels.
Hand-held computers, mobile phones and printers were the least likely categories to be upgraded or replaced, he said.
Separately, IDC released a forecast for the worldwide personal computer maker to grow by just more than 11 percent for the next two years, up from the single-digit growth seen in 2003 and declines in prior years. (Reuters)
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