European IT budgets finally picking up

A pick-up in European corporate IT equipment upgrade cycles will accelerate during the course of 2004, according to analyst IDC.

In the short term, IT investment is essentially being allocated to priority infrastructure renewals and upgrades.

"Companies are starting to feel more confident about overall business prospects," said Elsa Opitz, research analyst for IDC's European IT markets, in a statement.

"This renewed optimism is helping transform pent-up demand into small IT budget increases, but IT buyers remain prudent, notably with regards to new projects.

"Extensive pilots and proofs of concept are required prior to real product implementation, significantly prolonging the sales cycle."

Software will see the strongest revival, driven by robust system infrastructure sales - most notably across all areas of security.

Total hardware sales will grow by four per cent, with healthy demand for notebooks and consumer devices helping to push up overall market growth.

The research expects the services market to expand by 3.1 per cent this year, though discretionary spending on project-based services remains somewhat limited.

IDC identified outsourcing as a particular area of growth, as companies continue to seek ways of outsourcing operational costs as well as complexity.

This is leading to increased vendor competition and pressures on margins in the contract-bidding process.