Total European IT spending on computer and communications equipment, software, IT services and outsourcing, and IT staff is still lower than in the US, according to a forecast out today by Forrester Research, Inc. (Nasdaq: FORR). Despite a greater collective GDP for Western and Central European countries than for the US, Forrester estimates IT spending for Europe at $565 billion in 2006 (¿448 billion) compared with $721 billion in the US. However, Forrester reports that growth in European IT spending is now starting to match or exceed US IT spending. In US dollars, European IT spending will grow by 5.1% in 2006 ¿ almost as high as the US growth of 5.8% ¿ before slowing to 3.7% in 2007, in parallel with the US IT spending slowdown to 2.9%. Forrester predicts that new investment in computer and communications equipment and software will grow by almost 4.5% in 2007 after 2.1% growth in 2006, due to cautious European CIO spending plans this year.

Andrew Parker, Vice President at Forrester Research, said: ¿While 2005 was a relatively strong year for IT spending in Europe, 2006 arrived with a mix of positive and negative indicators for the continuation of this trend. On the positive side, forecasters expect nominal GDP growth for all the countries of Europe to be stronger in 2006 at 3.9% than the 3.7% growth in 2005. Also, Q1 2006 IT vendor data on European revenues was 8% higher than in the same period in 2005. On the negative side, European CIOs were planning average budget increases of just 1.6% moving from 2005 to 2006. Bringing together these positive and negative factors leads us to our forecast of moderate 3.8% growth in European IT spending in 2006.¿

¿While US IT spending has been growing faster than European IT spending in recent years, European IT spending growth is now poised to exceed that in the US¿, stated Andrew Bartels, Vice President at Forrester Research, who has been responsible for Forrester¿s North American IT spending forecasts. ¿With European economic growth showing signs of improvement while the US economy is likely to slow down, 2007 will be the year when European IT spending grows more rapidly than that in the US or Canada.¿

Europe Still Has A Technology Gap With The US

According to Forrester, Europeans like to think that they use as much technology as the US. However, the reality is that their economies have a way to go to catch up with the US. Leading European multinationals are indeed as technologically advanced as US multinationals. But below the top tier of companies and outside of the UK and Scandinavia, smaller and medium-size companies and governments still lag behind the US in levels of IT investment and in adoption of technology to improve productivity. European governments and companies now have an opportunity to narrow that gap as US enterprises struggle with slower economic growth and tighter IT budgets in the next couple of years.

European IT Purchases By Country: The UK Leads Germany

Despite the unifying effects of the European Union, Europe is still in many ways a collection of individual countries. Germany, the largest economy in Western and Central Europe, was also the largest purchaser of IT goods and services through 2002. However, the UK market for IT goods and services has now outstripped the German market. Given the relative size of the German economy, its leading position as an IT market is not surprising. The UK economy is slightly smaller than the French economy, but the UK economy has been more dynamic, and UK firms and the public sector have been active users of technology.

Parker states: ¿Forrester expects that UK businesses and governments will spend ¿61 billion on IT goods and services in 2006, compared with ¿57 billion by German businesses and governments. France and Italy come next, at about two-thirds the size of the UK or German markets. Spain, the Netherlands, and Switzerland will spend ¿15 billion to ¿20 billion each on IT goods and services in 2006, with Belgium and Sweden each spending around ¿10 billion. Denmark, Austria, Poland, Finland, and Norway will spend ¿5 billion to ¿7 billion each. All the other markets will spend less than ¿5 billion each.¿

The reports mentioned in this release, ¿European Enterprise IT Spending: 2006 To 2007¿ and ¿European IT Spending 2006: Country-By-Country¿, are available to Forrester WholeView2TM clients.