The Europe, Middle East and Africa (EMEA) enterprise IT spending is expected to reach $795.2bn by 2011, an increase of 1.3% compared to last year, according to a new report from IT research and advisory firm Gartner.
EMEA will be the only region to show a decline in IT spending in both 2009 and 2010, with enterprise IT spending forecast to total $784.8 billion in 2010, a decline of 2.1% from 2009.
Gartner senior vice president and global head of research Peter Sondergaard said the decline in IT spending in 2010 is placing EMEA as the slowest region to fully overcome the downturn.
"We expect Western Europe to record the worst decline in EMEA in 2010 (-3.3% percent), and experience the slowest long-term growth rate with a compound annual growth rate of 0.8% through 2014," Sondergaard said.
The research firm said that the European sovereign debt crisis is heralding a period of austerity that is affecting the mature economies of Western Europe which are faced with increased market scrutiny of their public finances.
To avoid following in Greece’s footsteps, a number of other European countries, notably the UK have since followed suit and adopted public sector austerity measures of their own in an effort to scale back their public deficits and debt.
"We forecast enterprise IT spending in government in EMEA to decline 2.8% in 2010 and total $139.6bn. It will exhibit slow growth through 2014 as the public sector continues to focus on bringing budget deficits under control during the next five years."
The research firm said that the ongoing drop in the value of the Euro and the British pound should promote healthy export growth in Western Europe and with it, positive economic growth.
Gartner analysts said as governments scale back their spending and social support, Western Europe is not expected to return to stronger enterprise IT spending growth until 2012.
In addition, the report revealed that in 2010, the computing hardware market is the only segment to return to growth in EMEA with hardware spending forecast to total $79.4bn, a 4.6% increase from last year.
"Of the hardware segments, storage was the least affected in 2009 and has the best overall outlook through to 2014, as storage capacity demands continue to grow exponentially while server, printer and PC revenues will each suffer from migration to lower cost devices or configurations which will inhibit the spending outlook, particularly in Western Europe."
The IT services market in EMEA is forecast to decline 5.6% and reach $234bn in 2010.
However, from 2012, Gartner predicts that enterprise software spending in EMEA will surpass growth in spending on hardware, and this trend will continue through 2014 as organisations begin a new software applications replacement cycle.
In Western Europe, countries leading the rebound, such as Germany and France, contrast sharply with those including, Greece, Italy, Spain and Portugal still struggling with weak growth.
In EMEA, all the verticals will continue to show decline in 2010, except for utilities which will post $46.2bn enterprise spending in 2010, a 1.9% increase from 2009, and is expected to exhibit the highest year-on-year growth through 2014.
Gartner said that the utilities industry moves to the forefront of growth based on regulatory initiatives and policy changes that are requiring the implementation of new processes, enabling infrastructure and rich analysis of energy information.
In 2011, only two verticals, transportation and education, will register further decline in EMEA.
The education market, in the face of broad multi-year budget shortfalls will cut IT spending more deeply in order to maintain teaching staff while Transportation remains a laggard in IT spending growth with mixed economic indicators and the remaining specter of an economic double dip keeping IT investments in this industry on the defensive.