Analysts warn on 2004 spending

Ovum Holway has added its weight to predictions of modest growth for UK IT spending in 2004.

Analysts Meta Group, Gartner and the Economist Intelligence Unit have forecast moderate growth for this year, with IDC slightly more optimistic at six to eight per cent growth worldwide.

Speaking at the inaugural Deloitte Quarterly Review, Richard Holway, director at analyst Ovum Holway, estimated "overall UK growth in the region of one to five per cent".

"Our industry is going to grow at a modest rate at best," he told delegates attending the networking event for directors of techMark and AIM-listed companies.

Richard Kramer, managing director at Arete Research, also reinforced predictions from a global industry perspective, forecasting "low, single digit growth".

Services and outsourcing are likely to drive the market in 2004, as they had done in 2003, delegates heard.

"And that is only with savings of some 20 per cent, even with contract renewals," said Holway, who also expected outsourcers to come under pressure.

"There is a price pressure that chief information officers are bringing to bear on outsourcers," he warned.

Kramer added that it is still very much a buyer's market, and suggested that UK industry growth rates would be lucky to keep up with gross domestic productivity.

He also suggested that canny buyers "will not be rushed into buying and do not want to be somebody's test bench".

Asian companies would gain a stronger foothold in European markets as a result, according to Kramer.

"I do believe that [last year] will mark the end of declining revenues," said Holway. "We will have very positive figures compared to what we were talking about for 2003."

Delegates reacted positively to the analysts' predictions.

"It is much better to be realistic than to be burnt by hype around huge growth," Neville Merritt, marketing director at software vendor SSI, told vnunet.com.

Kevin Gell, managing director at scientific software vendor Tessella, added: "It is possible to be too pessimistic about the end of growth in IT but I thought what I heard was very realistic."