Even though the IT market in Europe demonstrated strong growth in 2004, it will not be that escalated in 2005, according to market research firm IDC. Furthermore, the growth in 2004 was mainly conditioned by relatively weak U.S. dollar against the Euro, the company claims.

“IT spending in Europe continues to be inhibited by the tepid economy,” said Marcel Warmerdam, director of IDC's European Black Book service. “In the short term, many companies are struggling to unleash the desired funding for new projects, applications, and IT solutions. Clearly, the market environment is still improving from last year, but IT spending in Europe is now expected to lag the U.S. and other major economies during 2005.”

With foreign currency fluctuations, high oil prices, and elevated unemployment continuing to buffet Europe's economy, IT spending growth will remain modest this year. In its forthcoming quarterly update to the European Black Book, IDC forecasts total IT market growth of 4% in the region for 2005, compared with a previous forecast of 5.6%.

In 2004, the Western Europe IT market grew by 12% in U.S. dollar terms due to the strength of the euro against the dollar, but by only 3% in euro terms, IDC claims. Currency fluctuation also impacted the European market in other ways, ranging from pricing to sourcing strategies. Packaged software markets enjoyed the fastest growth as the market recovered gradually from the downturn of 2001–2003.

“In the long term, we still expect the European IT market to rebound to healthy growth rates in the next few years,” said Mr. Warmerdam. “As the economy improves, business managers will again start to recognize the benefits of investments in new applications, business intelligence, and dynamic IT solutions. In the short term, however, it seems that the current mood of economic uncertainty and ‘good-enough computing’ will inhibit overall market growth in 2005.”

The IDC European Black Book is updated every quarter with market sizing and forecasts for the European IT Market Hardware Software and Services.