The global IT industry suffered its largest decline ever in 2002, with a growth rate of -2.3 per cent, according to research by market intelligence agency IDC.
"Overall, the IT industry has contracted by roughly three per cent over the past two years," says John Gantz, chief research officer, IDC. "This is in sharp contrast to the average annual growth rate of 12% enjoyed by the industry over the past 20 years."
According to IDC, this year's decline is due to a 9.3% reduction in the systems market, comprised of PCs, servers, and workstations. The worldwide storage market also shrank by 10.6% and is not expected to recover to its 2001 size until after 2006.
The global market for network equipment experienced a 7.6% decline as sales to telecom service providers dropped sharply and the services market, which today represents over one-third of total worldwide IT revenues, saw average contract values fall to a three year low.
But IDC does expect the $875 billion dollar IT sector to recover from this low point with a 2003 growth rate of more than five per cent, although it warned that software spending will remain weak and price competition will inhibit revenue growth in the hardware sector.
Beyond 2003, the company expects growth rates to improve for several years followed by slower growth later in the decade.
The agency projects IT spending in the US to grow 4.4% in 2003, led by renewed demand for servers, security and network equipment. Storage and software are forecast to enjoy more robust growth starting in 2005, while PC revenues will resume their decline after 2004. This trend is expected to be mirrored in Japan, while the rests of Asia/Pacific will experience even more substantial gains.
Although Europe is not expected to match the economic growth in the US, IT spending will grow 5.4% next year followed by several more years of solid gains.
But IDC's alternative downside forecast, which takes into account external factors such as another plunge in the stock market, suggests that worldwide IT spending growth next year would be closer to two per cent, with spending in future years approximating real GDP growth.
"Although the industry as a whole won’t return to the kind of growth enjoyed before the downturn, there will be a number of bright spots over the next several years," says Stephen Minton, director of worldwide IT markets and strategies. "Innovation and value will be important drivers that lead the industry back to health."