The information technology (IT) industry suffered its
largest decline ever in 2002, with a growth rate of negative 2.3%, according to market researcher IDC, Framingham, Mass.
However, IDC expects the $875 billion dollar IT industry to recover with a 2003 growth rate of more than 5%.
Overall, the IT industry has contracted by roughly 3% over the past two
years, compared to average annual growth rate of 12% enjoyed by the industry over
the past 20 years, the company said.
Major contributors to this year's decline include a 9.3% reduction in the
worldwide systems market, comprised of PCs, servers, and workstations.
Meanwhile, the worldwide storage market shrank by 10.6% in 2002 and is not
expected to recover to its 2001 size until after 2006.
The worldwide network
equipment market experienced a 7.6% decline as sales to telecom service
providers dropped sharply. And the services market, which today represents
over one-third of total worldwide IT revenues, also underwent a dramatic
decline as the average contract value fell to a three year low, IDC said.
Although IDC expects IT spending to resume growth in 2003, it cautioned
against unrealistic expectations for the industry. Software spending will
remain weak while price competition will inhibit revenue growth in the
hardware sector. Services growth will be similarly restricted by smaller
projects. Beyond 2003, IDC expects growth rates to improve for several years
followed by slower growth later in the decade.
IDC also emphasized that significant changes in the economic or
geopolitical environment, such as a prolonged war in Iraq or another plunge in
the stock market, could result in lower growth rates for IT spending. Because
of the possibility that these more negative external conditions might be
realized, IDC produced for the first time an alternate "downside" forecast.
Under these more negative conditions, IDC believes worldwide IT spending
growth next year would be closer to 2%, with spending in future years
approximating real GDP growth.