EMEA only region to show decline in enterprise IT spending

Europe, the Middle East and Africa (EMEA) is the only region to show a decline in IT spending in both 2009 and 2010, with enterprise IT spending forecast to total $784.8 billion in 2010, a decline of 2.1 percent from 2009, Gartner has said.

Although EMEA will rebound in 2011 and reach $795.2 billion, a 1.3 percent increase from 2010, it will also be the one to show a decline in IT spending in both 2009 and 2010.

Peter Sondergaard, senior vice president and global head of research at Gartner, presented the findings at the Symposium/ITxpo 2010. He warned that the decline in IT spending in 2010 would place EMEA as the slowest region to fully overcome the downturn

“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,” he said.

According to Gartner the problem lies in the European sovereign debt crisis, which is causing  a period of austerity and is affecting the mature economies of Western Europe.

It said a number of European countries, including the UK were hoping to avoid increased market scrutiny of their public finances and avoid following in Greece’s footsteps by adopting 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. But Gartner added that as governments scale back 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 organisations 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. . However, 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 has been hit the hardest and Gartner says this will continue to struggle in EMEA. It will also be the slowest to return to growth. It is forecast to decline 5.6 percent and reach $234.0 billion in 2010.

Enterprise software spending in EMEA in 2012 is said to surpass growth in spending on hardware, and this trend will continue through 2014 as organisations begin a new software applications replacement cycle.