Despite reports of IT budgets being squeezed, the outlook for communications and IT services spending looks more positive in this region of the world than any other, according to a consensus of analysts and industry watchers.
In 2006, IDC predicted there would be industry disruptions ahead. This year the IT sector is now in the throes of change catalysts – globalisation, convergence, software-as-a-service, service-as-software and the ‘Google Effect’.
These are global trends with distinct twists, it predicts, that will affect Europe, and 2007 will see visible shifts in the ICT landscape as vendors adapt to change and users try not to be overwhelmed.
Slow growth in IT spend
According to the analyst firm, total ICT spending in Europe, Middle East and Africa is expected to grow by 4.8 per cent to reach £498 billion in 2007. Growth in emerging markets is forecast to be significantly faster than in Western European countries, representing 17 per cent of total ICT spending in 2007. All this change will be masked by single-digit spending growth on IT and even lower growth for telecom services (software – 7.3 per cent, hardware – 6.8 per cent, services – 6.1 per cent, and telecoms – 3.0 per cent). Users will have to adapt to tight budgets and vendors will have to grow by gaining marketshare, meaning they will have to adopt new approaches.
It predicts convergence and multi-play strategies will be the flavour of telecom developments as vendors seek to increase customer ‘stickiness’, while Moore’s Law will continue to push developments in the hardware area, with vendors increasingly successful in selling to small and medium businesses and consumers. The services market will continue to drive towards managed services and stronger ‘solutions’ selling. And infrastructure investments will drive much of the software market, where we expect to see continued acquisition activities in the year.
From a customer perspective the main issues for 2007 are security, virtualisation, regulatory compliance and mobility, with each theme in turn creating shifts in market direction and growth.
The growth in spending echoes record levels of confidence across the European communications and IT services sector, as the annual IT confidence survey by global PR network Eurocom Worldwide in association with its UK member agency, Six Degrees, has found.
A massive 63 per cent of chief executive, director or vice president-level European executive respondents expect to increase IT headcount, compared to 58 per cent last year and only four per cent expect job losses, down from eight per cent last year.
“The study finds a significant increase in confidence levels from an already high base last year,” said Mads Christensen, Eurocom Worldwide network director. Nearly one in three (65 per cent) respondents are more confident about the sector’s prospects in 2007, compared with 53 per cent last year. Over 90 per cent expect revenues to increase over the next 12 months, up from 79 per cent last year.
In line with the IDC findings, sectors that expect to see most growth over the next 12 months are IT security, followed by mobile services, software-as-a-service, customer relationship management and IT outsourcing. Again, Western Europe is seen as the best geographical prospect for growth in this sector by 38 per cent, followed by the US (19 per cent), Central & Eastern Europe (17 per cent) and China (10 per cent).
On the other side of the coin, the vast majority (81 per cent) of respondents believe that their country is losing IT service jobs to lower-cost centres such as China, India and Eastern Europe.
On the domestic front, a trend towards importing higher skilled migrant IT workers has led to a 32 per cent rise in visas issued to overseas IT workers to come to the UK. The vast majority (79 per cent) were issued to staff from India, a 47 per cent increase during the last year.