U.S. IT Spending Set for (Uneven) Recovery

Western states leading technology business spending in 2004, IDC finds

Western states leading technology business spending in 2004, IDC finds

Framingham, MA — March 30, 2004 — The United States economic recovery is gathering steam, and information technology (IT) budgets are seeing the first meaningful increase since 2000, but some regions are rebounding more rapidly than others, with the West leading the pack, according to a new study from technology research firm IDC.

In its report entitled "The United States Black Book: IT Spending by Vertical Market," which details IT spending by state and vertical market, IDC reports that IT spending by U.S. businesses is expected to increase 4.7 percent by the end of 2004. This recovery, however, will vary from coast to coast.

"The IT spending recovery across the United States remains uneven," said Stephen Minton, program director for worldwide IT markets and strategies research at IDC. "While relatively strong growth will return this year to many Western states, including California, the same cannot be said for the manufacturing heartlands of the Midwest and South. Technology spending will also remain depressed in states such as Missouri, Kansas and South Carolina."

In the Northeast, spending in the financial and banking industries will lead the way. "When targeting the Northeast, IT vendors need to remember that it is a volatile environment," said Jessica Goepfert, program manager for U.S. IT opportunity research. "While sometimes that volatility can work in their favor, it can also hurt their business. Despite the roller coaster effect, it is an entrepreneurial region, where people and business may be more willing to take a chance on something new and innovative."

In the Western states, the signs of recovery are very positive, according to IDC. Total IT business spending in California alone was $37.9 billion at the end of 2003 and projected to grow 5.0 percent in 2004. "Industrial production is rising, and job growth in the services industry is recovering in most Western states," said Juan Orozco, senior analyst for worldwide IT markets and strategies research. "Income is also expected to accelerate here in 2004, bringing more stability to consumer and housing markets. In general, consumer confidence is up in the Western states and we are starting to see some of these positive signs reflected in the IT spending trends."

Overall, IDC research indicates that the United States economy will make a strong recovery in 2004, with GDP increasing 4.6 percent by the end of this year, which is the fastest single year growth since 1984.

"The U.S. economy ended 2003 on a strong footing, and the positive momentum has carried into 2004," said Kevin White, research manager for worldwide IT markets and strategies research. "This year, a salutary combination of strong economic growth, healthy corporate profits, buoyant stock markets, low interest rates and generous tax incentives should produce a solid year for IT investment."

The IDC report covers business IT spending only and does not include projections for consumer or government IT spending. The forecasts are based on IDC's Worldwide Black Book, Version 4, 2003.