Software, services to carry European IT

Report warns of sluggish performance in telecommunications sector

Demand for software and IT services will continue to grow steadily in Europe this year, but sluggish performance in the telecommunications sector will dampen the reasons to celebrate, according to a forecast released Thursday ahead of the Cebit trade show.

The overall ICT (information and communications technology) market will grow by only 2.9 percent in 2007, to €668 billion ($887 billion), the European Information Technology Observatory (EITO) predicted in its annual report. That's slightly slower than last year, and well down from 2005 growth of 4.1 percent.

The IT sector, including software, hardware and services, will show the strongest growth, up 4.4 percent this year to €320 billion, the EITO said. Software spending will lead the way, increasing by 6.5 percent this year, compared with 6.3 percent in 2006.

IT services, including outsourcing, consulting, and systems integration, will grow by 5.5 percent, up from 5.3 percent in 2006. Hardware revenue is expected to grow just 1.7 percent in 2007, driven by notebooks and multifunction devices such as printer-scanners. Demand for desktop PCs will dip slightly, the study said.

In 2008 Europe's IT sector will grow slightly more quickly at 4.7 percent, the EITO said, to reach €335 billion.

The market for telecommunication products and services, by comparison, is expected to grow only 1.5 percent this year, to €348 billion, and by 1.1 percent in 2008.

The biggest sales-generator for telecommunications this year will be broadband access systems, particularly DSL (Digital Subscriber Line) modems in homes. More than 42 percent of European homes are now connected to the Internet via broadband access systems, the report said.

The EITO study also contains revenue forecasts for consumer electronics products. Sales are expected to increase 2.5 percent, buoyed by strong demand for flat-screen TVs.