IT spending to increase 6.3 percent in 2006

Global IT spending should grow by 6.3 percent in 2006, driven by software spending, but that growth would be smaller than the 6.9 percent in 2005, IDC said Thursday.

Global IT spending totaled about $1 trillion in 2005, and should grow by about $100 billion in 2006, IDC said.

Hardware growth of 9 percent drove spending in 2005, the "fastest rate of growth since Y2K," said Stephen Minton, vice president of the IDC worldwide IT markets research group. But a pent-up demand for hardware and infrastructure upgrades shouldn't continue at the same pace in 2006, he said.

However, software spending should grow by 7 percent, with hardware and services spending growing at a 6 percent clip, he said.

Global IT spending grew about 5 percent in 2004, Minton said. He called 2006's forecast "pretty good."

"It's a little bit better than most industries," he said. "But we don't see IT going back to double-digit growth."

IT spending grew by 14 percent in 1995, fueled by the growth of the Web and Microsoft's Windows 95 operating system, Minton said. That double-digit growth continued through 2000, but spending declined in the dot-com bust year 2001.

In the U.S., overall growth in 2006 will be 5.8 percent, IDC predicted, a slight decline from a 6.4 percent expansion in 2005. Strongest growth will be in network equipment, outsourcing services and system infrastructure software, including security tools.

Elsewhere, improving economic conditions are contributing to an enhanced outlook for IT spending in Western Europe, where overall IT growth will reach 6 percent this year, IDC said. The Asia and Pacific region, excluding Japan, will see 9 percent growth in 2006, led by double-digit spending gains in China, with 14 percent, and India, with 21 percent, IDC said.

IDC expects IT spending to grow by about 5 percent a year through 2009, with lower growth rates due to increasing "maturity" in several IT sectors, including networking equipment, Minton said.

IDC is owned by International Data Group, the parent company of IDG News Service.