European ICT market 'has turned the corner'

Outsourcing and telecommunications will drive Europe down the road to recovery with Britain leading the way, analysts predict. But don't expect another boom anytime soon

The IT and telecommunications downturn in Europe is over and the UK will lead the recovery, research group Ovum reported on Friday.

According to the first issue of Ovum's EuroView Market Trends report, the European information and communications technology (ICT) market will grow by 4 percent per annum between 2004 and 2006.

While this marks a welcome return to health for the sector, Ovum also cautioned that the days of double-digit growth are "well and truly over".

Ovum has identified two key factors behind the better times it believes are ahead -- outsourcing and the telecommunications sector. The fact that many UK companies have been happy to send their IT services overseas apparently means Britain is in better shape than other European countries, although outsourcing also means that higher profits aren't necessarily being translated into more UK jobs.

"The UK is the most robust market, because it has already taken the medicine," said Ovum director Richard Holway.

"Measured by revenues, the majority of IT in the UK is now outsourced. But the greatest opportunities lie in Germany. The UK has also put out the welcome mat to offshoring, in contrast to France which has put up the barriers," Holway added.

According to Julian Hewitt, Ovum's chief analyst, the mobile market is keeping much of the overall ICT sector afloat. Its buoyancy may diminish somewhat in the future, though.

"Germany and the UK had a fantastic year in 2003, with 14 to 15 percent growth rates. We think these will fall to 6 to 7 percent in the coming years. Future growth will be due to the emergence of new data services," Hewitt explained.

Ovum's report is the latest in a series of analyst reports to forecast ICT growth for Europe, and the UK in particular.

IDC predicted in February that Europe's telecoms market would see steady growth this year, while a survey of 150 senior UK executives recently found that over half of them expect to spend more on IT in 2004 than last year.