IT spending is expected to grow 5%
Industry researchers are expecting the modest growth in the IT sector to continue substantially unchanged through 2005. For example, U.S. investment bank Goldman Sachs’s study expects spending on hardware and software to grow by between 3% and 5% in 2005, which is a similar level of growth to that in 2004. The renowned sector analysts at Gartner foresee a global increase in IT spending of around 5% in 2005.

Gartner expects 4% growth in U.S. IT spending. BITKOM, the German IT industry association, forecasts single-digit growth for its home market. According to its survey, the total revenue of IT and telecommunications companies in Germany is set to increase 3.4 % to €136 billion in 2005. BITKOM goes as far as saying the IT sector will be “the draught horse pulling the entire German economy.”

Only SMB software market expects 10 % growth
BITKOM’s view of the future for the software subsector in Germany is even more encouraging. It is in this area that demand is most likely to grow. U.S. industry studies record heightened interest in new systems and applications, whereas demand for additional components for existing systems is likely to remain flat. A Goldman Sachs report paints a more optimistic picture of the market for updates and additional applications to existing customers, adding that its scenario does not depend on a substantial decline in prices.

If economic conditions fetter overall demand for business software, the only ways to grow in 2005 would be increasing market share and offering innovative products, according to analysts at Morgan Stanley. They believe the current move from rather monolithic applications to a completely new, flexible software architecture offers opportunities, but also carries risks. After the age of the Internet, we are now moving into the era of the integrated platform and application system. This will open up growth prospects, provided the challenges are evaluated correctly and solutions are precisely tailored to market requirements. Investment bank JPMorgan’s IT sector analysts see SAP as once again ahead of the global competition in that regard.

Morgan Stanley’s forecasts show that the small and midsize business (SMB) software category is a special case. SMBs as a class have a pressing need to make up ground, so IT analysts are predicting 5% to 10 % annual growth in that segment. However, IDC Research expects growth of the total business software market to be limited to some 5% in 2005.

BITKOM and Goldman Sachs agree about the most promising types of products. They both consider that security applications, offering protection against viruses and loss of data, still have the greatest potential of all software. Other categories for which they expect stronger demand growth are wireless local area network (WLAN), network management, enterprise resource planning, data storage, and data analysis and measurement solutions. AMR Research predicts that the market for customer relationship management (CRM) solutions will grow by an average of 9% per year until 2008.