West tightens IT belt while India, China boom

IT budgets are being slashed in the US and Europe as strong growth in China, India and Russia leaves the Western tech industry in the shade.

Just under half — 43 percent — of Western companies are cutting back their IT spend and nearly 30 percent are scrutinising IT projects for better returns, according to a report by analysts Forrester Research, which surveyed almost 1,000 executives.

Meanwhile IT spending for 2008 in China, Russia and India is surging forward at 18 percent growth, far ahead of the 5.2 percent increase globally, says market research institute Eito.

Europe and the US, meanwhile, are facing the credit crunch by trying to cut the amount paid out to vendors. The slowing US economy has seen 70 percent of firms negotiating lower rates with suppliers and nearly 60 percent are cutting back on contractors. With budgets squeezed, just over 40 percent of companies plan to increase their use of offshore vendors.

But the overall levels of spending in the West in 2008 are predicted to remain far higher than emerging markets overall, with the EU and US standing at €311bn (£248bn) and €345bn respectively, compared to €39bn in China, €18bn in India and €13bn in Russia.

In Russia only five of the top 20 IT service suppliers were non-domestic companies in 2007, with foreign providers such as HP and IBM slipping against their Russian counterparts. According to Pierre Audoin Consultants (PAC), local vendors were buoyed by mergers and acquisitions and better territorial coverage.

PAC added that Russia's outsourcing market remains immature due to client concerns about information security issues, with spending reaching around €93m in 2007.