March 23, 2006 9:31 AM PST

IDC: China, India to see big gains in IT spending

Global IT spending growth is expected to slow slightly from 2005 due to a natural cycle shift, while China and India will see double-digit gains.

IDC predicts a 6.3 percent increase in IT spending for 2006, attributing global gains to robust emerging markets and strong economic stability in the U.S., Europe and Japan. This is slightly slower than 2005, which saw 6.9 percent gains.

This 6.3 percent figure differs from IDC's original prediction last December, when the research company forecast 5.5 percent growth. Steve Minton, vice president of IDC Worldwide IT Markets, said the researcher readjusted its forecast after seeing an overall improvement in the economies of Europe and Japan. An unpredicted 9 percent growth in hardware for the quarter ending Dec. 31 also bumped the number up.

Significantly larger spending gains are forecast for India and China. India is predicted to have 21 percent growth and China 14 percent. This robust growth gives the Asia-Pacific region (excluding Japan) an overall forecast of 9 percent gains in IT spending.

IDC believes that the infrastructure upgrade cycle has now weakened globally. Software, now seen as the strongest segment, is predicted to grow as much as 7 percent. Hardware and services follow closely behind with a 6 percent worldwide growth forecast. This shift will slow overall growth for 2006, according to IDC.

"It's a natural progression. Infrastructure equipment was huge last year, so budgets are now free to invest in things like business intelligence," said Minton.

The U.S. will see a slight slowdown, with 5.8 percent growth overall, compared with 6.4 percent growth in 2005. IDC predicts system infrastructure software, network equipment and outsourcing services in the U.S. will show the strongest gains.

"The global economy will remain stable and robust, with marginal changes in growth compared to 2005. Though the engines of acceleration will rotate towards Japan and Europe, China and the U.S. will remain at the helm," said Anna Toncheva, program manager and economist for IDC's IT Markets and Strategies.

According to Minton, Microsoft's delay in releasing Vista will not affect IT spending.

"Overall, enterprise spending is the biggest proportion of IT. We don't think there will be a huge rush of businesses in any case to buy Vista. The upgrade to Vista will be more gradual in comparison to the Windows 95 event. This system upgrade is not going to have a material impact," said Minton. "Many consumers bought PCs in the last 18 months. There is not the pent up demand of a year ago."

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