European IT sector maintains growth

Optimism in IT offset by predicted downturn in telecoms sector.

Growth in the European IT and telecoms market will fall below eight per cent next year, but the IT side will sustain robust performance, according to a market research group.

The European IT Observatory (EITO) predicted that, despite impending recession in parts of western Europe, IT sales were expected to grow faster in 1999 than this year, with expansion rates greater than the rest of the world.

But the telecoms market put a dampener on the figure: its growth will contract by a full percentage point between 1998 and 1999.

According an EITO report, overall growth next year will be 7.9 per cent, making total revenues of 416 billion euros. This compares with growth of 8.3 per cent this year and with an increase of 9.6 per cent in the US in 1999, down from 9.9 per cent this year.

It stated: 'Western Europe is showing a clear recovery by international comparisons. EITO finds that, for the first time in more than 10 years, the European IT sector is developing faster than the world market as a whole.'

The European IT sector is forecast to grow 9.5 per cent to 209 billion euros in 1999, up on a 9.3 per cent rise this year. This outperforms the global growth rate of just under nine per cent next year. But telecoms will see its 7.3 per cent growth this year fall to 6.3 per cent in 1999.

'South east Asian and Japanese setbacks will reduce worldwide growth this year and next. Japan will show a reduction of about one percentage point in 1998, but should be able to recover again in 1999 to a plus of 4.4 per cent,' the EITO report stated.

US growth will drop next year: 'The US market, with plus 9.9 per cent in 1998 and plus 9.6 per cent in 1999, is performing only slightly better than the market in western Europe.' The US will do worse than Europe in IT, the report added.

The highest IT growth rates are for professional services, up 15 per cent, with software expected to grow by 13.5 per cent in 1999, after 12.4 per cent this year.

Hardware will rise six per cent, up on five per cent this year, with NT server sales as the driving force, up an estimated 35 per cent next year, after 45 per cent in 1998.

Meanwhile, according to market research firm Forrester Research, vendors face lean times as revenue growth is forecast to peak in 1999 and decline in 2000, following a 17-year growth period.

Forrester predicted PC revenues will surge next year, due to US corporates investing in systems to replace old technology.