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Bad times here to stay for IT sector

This year's Holway Report predicts that the demand for IT will remain modest until at least 2004, and that US economic woes will spread to Europe

A report due out later this week will claim that 2001 is set to be another poor year for the UK's IT sector, with more profit warnings predicted and no immediate recovery in sight.

According to the 2001 Holway Report, last year saw the lowest revenue growth for Britain's IT service and software companies -- below ten percent -- since the early 1990s. This decline was responsible for an 86 percent drop in profits in 2000 compared to 1999. The report, published by Ovum Holway, will claim that the bad times are not yet over because there is no exciting new technology on the horizon to drive IT expenditure.

Richard Holway, director at Ovum, told the Financial Times that spending on IT would be relatively low until at least 2004. Some analysts believe there will be an upturn in 2002, but Holway takes a different view. "Every time there has been a rebound before it had been associated with a technology revolution," he said, identifying the personal computer in the 1980s, Windows in the early 1990s and the recent Internet and dot-com boom.

Holway also warned that Europe would not be immune to the economic slowdown in the US. Tough times across the Atlantic have already impacted on Britain, with both Compaq and Motorola recently announcing job cuts at factories in Scotland.

Despite a general gloomy prognosis, the 2001 Holway Report does identify some areas where growth will be strong. Outsourcing is predicted to do well as companies seek to cut costs -- a trend which will benefit the largest IT companies such as IBM more than smaller rivals.

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