Europe: ICT Market Overview
In 2002, Western Europe's ICT Industry showed an overall volume of € 550 bn; that is 29% of roughly 1900 bn. worldwide. For 2004 experts predict a volume of € 611 bn. (EITO/IDC) and a growth rate of 3.8% for telecommunication and of 2.4% for IT. The overall Western European market is expected to grow by 3.1% in 2004, compared to only 0.6% in 2003, with the UK expected to be a driving force with a growth rate of 3.2%. The UK's ICT spending will amount to € 124.7bn (£83.3bn) right to overtake Germany, currently the largest ICT economy in Europe (EITO). Forrester Research predicts that the UK's ICT market will have grown to € 138.2bn by 2005, compared to € 133bn in 2002. In contrast, Forrester believes that the German ICT market will be worth € 138.1bn in 2005, and will actually fall to € 136bn this year compared to € 138bn in 2002.
According to a new report by Forrester IT services spending in Europe will shake off its weakness in the early 2000’s to reach €129 billion by 2008. But the research firm warns that a surge of outsourcing uptake will reshape the whole market, forcing vendors into wholesale reinvention.
"Early predictions of an IT services spending rebound during 2003 have bombed as Europe's major economies remain stubbornly stuck in a low-growth rut," said Forrester Senior Analyst Andrew Parker. "But successful IT services firms between now and 2008 will not rely on a market of booming demand. They will instead carefully match their service offerings to the cost-driven agendas and business-value expectations of clients. Through effective cherry picking among high-growth service categories, a minority of providers will beat the mainly single-digit annual spending growth."
Forrester predicts that European enterprise spending on IT services will reach more than € 129 bn. in 2008, up from €82 bn. in 2002. Europe's 8% compound annual growth rate (CAGR) between 2002 and 2008 is moderate by the standards of the 1990s and lower than American IT services spending, which will achieve 10% CAGR over the same period. However, it does show a 3% uplift on earlier predictions during the recession. The next two years will see the strongest resurgence of IT services spending -- with growth reaching 10% for all services in 2004 and 11% in 2005. A wave of outsourcing spending spurred on by firms' enthusiasm for reducing costs will be the key driver for this growth. Late 2004 and early 2005 will witness a surge of pent-up demand as firms relax the tight spending controls imposed during 2002 or early 2003.
During 2002 and 2003, Forrester found that agile firms sustained revenues by cashing in on an upturn in outsourcing deals. Forrester forecasts that this outsourcing shift will accelerate as European companies look for low-cost IT options, hand off capital IT assets, or seek new pay-as-you-go or value-based outsourcing models.
"With double-digit growth rates of up to 20% per year, infrastructure outsourcing will grow at a CAGR of 14% to rack up €34 billion of spending in 2008 -- up from €18 billion in 2003," Parker added. "By contrast, systems integration will achieve just 4% CAGR and fall from a 50% share of enterprise IT services spending to 43% by 2008. The total contract value of European outsourcing deals worth €50 million or more increased in 2003 by 87% compared with 2002. And with a CAGR of 18%, Forrester puts BPO at the top of the growth tree in Europe. Resulting strong growth across categories like human resources, finance and accounting, and call center services will drive Europe's 2008 BPO spending to more than €22 billion.