“This decline in IT spending in 2010 is placing EMEA as the slowest region to fully overcome the downturn,” said Mr. Sondergaard. “We expect Western Europe to record the worst decline in EMEA in 2010 (-3.3 percent), and experience the slowest long-term growth rate with a compound annual growth rate of 0.8 percent through 2014.”
The European sovereign debt crisis is heralding a period of austerity that is affecting the mature economies of Western Europe. Faced with increased market scrutiny of their public finances and hoping to avoid following in Greece’s footsteps, a number of other European countries, most notably the U.K., have since followed suit and adopted public sector austerity measures of their own in an effort to scale back their public deficits and debt. “We forecast enterprise IT spending in government in EMEA to decline 2.8 percent in 2010 and total $139.6 billion. It will exhibit slow growth through 2014 as the public sector continues to focus on bringing budget deficits under control during the next five years,” Mr. Sondergaard said.
Looking forward, the ongoing drop in the value of the Euro and the British pound should promote healthy export growth in Western Europe and with it, positive economic growth. Gartner analysts said as governments scale back their spending and social support, Western Europe is not expected to return to stronger enterprise IT spending growth until 2012.
In 2010, the computing hardware market is the only segment to return to growth in EMEA with hardware spending forecast to total $79.4 billion, a 4.6 percent increase from last year. “We are seeing a rise in shipments across hardware due to the low volumes in 2009 and from organizations gradually returning their replacement cycles to a normal length,” Mr. Sondergaard said. Of the hardware segments, storage was the least affected in 2009 and has the best overall outlook through to 2014, as storage capacity demands continue to grow exponentially. Server, printer and PC revenues will each suffer from migration to lower cost devices or configurations which will inhibit the spending outlook, particularly in Western Europe.
The IT services market continues to struggle in EMEA and will be the slowest to return to growth. It is forecast to decline 5.6 percent and reach $234.0 billion in 2010. Unlike in the past where IT services spending showed relative resiliency in tight times, a risk-averse and cost-focused mindset is today broadly persisting. While a lot of efficiency can be won through a productive focus on controlling cost, the emerging problem is a lack of balance, which inhibits investment in changing the business through new strategies, productivity enhancement, and process and product innovation.
From 2012, Gartner predicts that enterprise software spending in EMEA will surpass growth in spending on hardware, and this trend will continue through 2014 as organizations begin a new software applications replacement cycle. In Western Europe, countries leading the rebound, such as Germany and France, contrast sharply with those including, Greece, Italy, Spain and Portugal still struggling with weak growth.
“This is leading to a 'polarization' of performances in the software market,” said Mr. Sondergaard. ”The countries that are leading the recovery are being more proactive on the software purchase front, while those that are still languishing in recession miss out on the more innovative software investments. By 2014, this could lead to an even larger gap between the size and growth rates of the software markets in these two different types of countries.”
In EMEA, all the verticals will continue to show decline in 2010, except for utilities. Enterprise spending in utilities will reach $46.2 billion in 2010, a 1.9 percent increase from 2009, and is expected to exhibit the highest year-on-year growth through 2014. The utilities industry moves to the forefront of growth based on regulatory initiatives and policy changes that are requiring the implementation of new processes, enabling infrastructure and rich analysis of energy information.
In 2011, only two verticals, transportation and education, will suffer further decline in EMEA. The education market, in the face of broad multi-year budget shortfalls will cut IT spending more deeply in order to maintain teaching staff. Transportation also remains a laggard in IT spending growth – mixed economic indicators and the remaining specter of an economic double dip has kept IT investments in this industry on the defensive.
