Worldwide enterprise IT spending across all industry markets will grow 2.9% in 2010 and surpass $2.4 trillion, according to Gartner.
The IT research and advisory company says all industries are continuing to return to growth after a challenging year in 2009, when IT spending by vertical market totalled $2.3 trillion, a 5.9% decline from 2008.
The figures are based on the report: "Forecast: Enterprise IT Spending by Vertical Industry Market, Worldwide, 2008-2014, 2Q10 Update".
“The enterprise IT market will certainly return to growth in 2010, but we now expect it will grow by only 2.9% globally, down from 4.1% growth we had forecast earlier this year,” says Kenneth Brant, research director at Gartner.
He adds that the national and international government sector will experience the strongest growth rate in 2010, with IT spending growing 4%.
Prepare for worst
Gartner recommends that technology and service providers target high-growth industry segments through 2014.
Providers should also undertake further analysis of large, slow-growth segments for unusual growth opportunities at the sub-industry segment level.
However, Brant advises technology providers to exercise caution with regard to the economy and its impacts on enterprise IT markets.
"We're advising our technology provider clients to prepare business plans for 2011 on the basis of our most-likely scenario for enterprise IT spending growth - 3.5%. However, they should act now to develop contingencies to mitigate the risk of zero growth in 2011, a scenario that carries a lower probability, but a much higher potential impact," says Brant.
Technology providers need to be prepared for the worst case, where commercial IT markets stagnate and governments transition to fiscal austerity programmes, he adds.
Brant also urges technology providers to continue to promote IT solutions that deliver cost optimisation through 2011, which he contends will be a persistent and overriding value for IT buyers even as markets return to growth.
Local spending
Gartner identifies a 2.8% growth in IT spending in the banking and securities industry from 2009 to 2010.
Local bank Absa says it will spend R8 billion on upgrades and new IT infrastructure over the next three years, as it gears up for growth and puts systems in place to handle a slew of new regulations.
It intends to grow its base by expanding its offerings and growing on the continent, which will require an increased investment in IT systems.
Deputy group CEO Louis von Zeuner says: “Top line growth is under pressure and the volume is not there, but one cannot delay the spending.” He adds that IT is one of the company's top priorities.
Absa's planned investment in new IT projects will be evenly split between continuing to run, which will include investing in new systems to cater for regulatory changes, and its growth plans, he says.
IT for legislation
Last year, the bank spent a total of R4.5 billion on IT. However, this amount also included non-capital items, such as operational expenses and depreciation of assets. This year, Absa expects to spend a total of between R5.5 billion and R6 billion, of which R2.6 billion has already been spent, says Von Zeuner.
Absa's IT spend will increase as the company invests in more systems to cope with pending legislative changes and its African expansion plans, says Von Zeuner. “What is important for us going forward is to position ourselves for regulatory changes.”
New legislation, which requires investment in IT, includes the pending Protection of Personal Information Bill, the new Consumer Protection Act and the amended Companies Act, which comes into effect in October.
Von Zeuner explains that the new investments will go into data centres, its foreign exchange systems, and enhance electronic banking. He says it is important for the bank to build capacity, which requires enhancing its IT systems.
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