Cisco and HP: The recovery starts here

Is the gloom lifting? Cisco and Hewlett-Packard say they are cautiously optimistic about an upturn in 2004

IT and telecommunications spending are set to rise in 2004 after several years of gloom, according to two of Europe's senior tech bosses.

Both Cisco and HP are "cautiously optimistic" about prospects for this year, and are predicting growth in the amount of money invested in tech hardware, software services and faster connections.

Rob Lloyd, Cisco's president of Europe, Middle East and Africa, told attendees at Cisco Connection in Interlaken on Tuesday that he expected to see renewed growth in IT spending this year. Lloyd believes that many European companies are now more prepared to commit to capital expenditure, as part of a general economic recovery.

"There's a clear link between GDP growth and overall capital investment, and also between GDP growth and the percentage of that capital that is spent on IT. We're seeing a return to more normalised path of IT spending," said Lloyd.

Kasper Rorsted, HP's managing director for Europe, Middle East and Africa, also believes that IT spending is set to rise this year -- partly because firms need to upgrade essential systems and services after years of belt-tightening.

"Most companies who have made profits in the last year or 18 months did so through capital savings. A lot of companies have underinvested in IT in recent years, and that's not sustainable in the long term. We'll see a short-term revival based just on this," Rorsted told journalists.

"I'm more optimistic for this year than last year, but 2004 won't be a Christmas party," added Rorsted. He predicted that hardware demand will help the IT industry out of the downturn, but software -- led by services -- will take over in the longer term.

These comments back up research published by the Economist Intelligence Unit last week, which found that British bosses expect to spend more money on information and communications technology (ICT) this year than in 2003.

Corporate IT spending has generally been on a decline since the boom of the late 1990s, when fears of the Millennium Bug prompted many firms to upgrade their systems.

Lloyd is hopeful that companies aren't just planning to patch up their existing systems, though. He believes that some senior managers are prepared to make significant investments in new technologies if they're sure they will cut costs or help their business to compete. "CXOs want products that give clear added value to their networks. Intelligent services are the new competitive advantage," Lloyd said.

HP's Rorsted says there won't be a single killer application that kickstarts IT spending. Instead, he expects to see growth in a number of areas, including Wi-Fi, management software, e-government, IT consolidation, tablet PCs and blade servers.