A vintage year for IT

Revenue of #16 billion will be earned by the year 2000 from work on the millennium bug but some sectors of the industry will suffer when the deadline has passed, according to the latest Holway Report.

Analyst Richard Holway warned IT agencies will be 'very badly hit when supply exceeds demand in the early part of the new millennium'.

The year 2000 and euro hurdles are a major ingredient to current and anticipated high growth rates but 'when these are spent, growth rates will return to a more normal 10 per cent. This could hurt quite a few companies,' he predicted.

Holway described 1997 as a 'vintage year' for the industry with profit growth at 37 per cent, up on 28 per cent last year.

John Higgens, director general of the CSSA, said standards in the industry had also contributed to high profits. He said a continuing strong economy would cushion any downturn caused by the millennium and euro deadlines passing. A switch in demand from fix problems to developing systems would help keep the sector strong.

Higgens said the finding that staff costs remained stable, despite an additional 44,000 employees to the 250,00 already in the industry, indicated an 'investment' desire through hiring junior staff.

The strength of the industry was also reflected in UK companies leading foreign acquisitions. 'UK companies have always had the vision but now they have the means to do it,' he said.

Holway predicted 'hottest new growth areas' as business process outsourcing, desktop services, e-commerce and internet activities - forecast to top #2.5 billion by 2001 - and resource planning.