Monday, November 8, 2010

EMEA Enterprise IT Spending to Rebound in 2011 with 1.3 Percent Growth After Two Consecutive Years of Decline

Enterprise IT spending in Europe, the Middle East and Africa (EMEA) is forecast to rebound in 2011 and reach $795.2 billion, a 1.3 percent increase from 2010, according to Gartner, Inc. However EMEA will be 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.

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.

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.

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.

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