Europe 'Roaring Back' in IT, Says IDC

Europe is forging ahead of the U.S. in implementing new technologies and in developing a new IT spending model which focuses less on boxes and wires, according to market researcher International Data Corp. (IDC).

In addition to being more advanced than the U.S. in sectors such as wireless technology, Europeans are also spending more on software and services than on hardware, said Stephen Minton, IDC's research manager for the Europe, Middle East and Africa (EMEA) IT Markets Center.

In the U.S., hardware accounted for 42 percent of all IT spending last year, Minton said, while in Western Europe hardware spending has fallen to 38 percent, and in the U.K. to under 32 percent.

"The U.S. is definitely on the same trendline," said Minton, "It's just that the U.K. in particular, and Europe in general, are moving faster on this trend.

It's not unique to any region, it's just the speed at which the trend is being adopted."

Asked whether higher costs for software and services in Europe than in the U.S. could account for the percentage difference, Minton said that it absolutely is a factor which has an impact. "But what we see clearly from the research is that on the demand side as well from the supply side ... there's a new band of decision-makers on IT at the top of the company, and they're increasingly interested in solutions rather than just hardware," he added.

Hardware has been relegated to sales as a loss leader and is now only a small element of total IT solutions in Europe, Minton said. "The real driver in the sector is in software and services, whereas in the past it had been hardware advances, new processors and the like," he added. "Nowadays, the real advances are in software capability."

Asked what the trend means for hardware providers, Minton said that all businesses in the hardware sector already pay lip service to the idea that they are solution providers. "There are companies like Computacenter (PLC) in the U.K. that are really box shifters. Because they are aware of this trend, they will portray themselves as solution providers ... but in addition to building their image, they have to build their capacity" in software and services, he added.

Minton also noted that individual European countries are world leaders in several areas. Sweden, for example, has overtaken the U.S. in percentage of gross domestic product (GDP) spent on technology, while Switzerland, Denmark, and Norway have the largest IT spending per capita in the world.

Europe is not the only region adapting IT at a faster rate, and worldwide IT spending is expected to reach US$975.5 billion this year, according to Minton.

Separately, IDC on Wednesday also said that Europe's infatuation with mobile phones is set to result in continued rapid growth in the number of subscribers.

By 2004, the number of mobile phone subscribers in Western Europe will surpass 300 million people, with more people owning a mobile than a fixed-line phone.

The number of subscribers will reach 200 million already by the end of this year, according to a summary of findings from a new report titled "Western European Cellular Market Assessment : Forecast and Analysis, 1999-2004."

The main driver behind the growth in subscribers is the popularity of prepaid services, with 62 percent of all subscribers expected to have signed up for such services by 2004.

The Western European cellular services market is expected to be worth almost $86 billion by the end of this year, rising to $115 billion by 2004, IDC said in a statement.

At the same time, however, average revenue per user (ARPU) will decrease slightly over the forecast period, IDC said, although increased revenues generated by data and value-added services also will start to compensate for the lower mobile telephony prices.

IDC is a subsidiary of International Data Group Inc., the parent company of the IDG News Service.

IDC, in Framingham, Massachusetts, can be reached at +1-508-872-8200, or via the Web at

(Terho Uimonen in Stockholm contributed to this story.)

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