The global economy continues to founder, casting a pall on the outlook for the year ahead, but don't for a moment think that the electronics equipment market is about to enter a period of severe contraction. Demand for information technology products and especially electronics -- from both consumer and corporate buyers -- will continue to increase steadily through 2015 despite economic contraction pressures in Europe and North America, according to researchers.
The latest figures backing up this view come from IDC , which (to my particular delight) focused in two separate research reports on the Western European IT, utilities, financial services, and communications media markets, positing that these are sectors where executives expect to increase purchases of IT equipment. How could this be? Several key European nations are supposedly tottering on the edge of a financial calamity led by Greece, Ireland, Portugal, and Spain. The effects of Europe's inability to resolve its debt crisis has crimped growth globally and is reportedly hurting equity markets.
The IDC reports -- the first on Western European IT spending and the second focused on utilities, media, and financial services -- paint a more nuanced picture and provide a better understanding of the complex supply-and-demand situation ahead. Rather than predict continued decline, the analysts project that total IT spending in Western Europe will rise to $460 billion by 2015, building on a recovery that started in 2010. The bigger lesson, though, is that although there are numerous areas of concern, the market is unlikely to contract, and that holds both opportunities and challenges for electronics equipment manufacturers.
The challenge will be figuring out how to avoid overproducing for depressed market segments while tapping opportunities in growth areas, according to Nina Bonagura, senior research analyst with IDC's European Vertical Markets team. "Given the increasing economic uncertainty over the pace of recovery, it is extremely important to identify where pockets of growth will be concentrated," Bonagura said in the report. Companies must therefore seek ways to develop a better understanding of the market dynamics to identify growth areas and successfully target their products.
That's where the second IDC report on utilities (oil and gas), financial services, and media comes in. Paradoxically, it is the severity of the challenges facing these sectors that is simultaneously driving interest in IT equipment. In order to reduce operating costs and maximize efficiencies, companies in these markets are jacking up their IT capital expenditure budgets. They are also more concerned about the advantages they can glean from deploying the equipment than in seeking the least expensive option. This is because utilities companies understand they can squeeze enormous productivity out of current operations by rolling out features like smart metering and helping customers be more efficient consumers.
Here's an excerpt from the IDC report:
Respondents in these sectors have greater external ICT spending, with a positive balance of 10% between respondents expecting an ICT budget increase and those expecting a decrease. Also, when choosing an IT vendor, they are more interested in the vendor understanding their business than in a lower price solution, seeing IT more as a business enabler than a cost.
Delightful news, isn't it? So, does this mean rapid growth in electronics despite a weakening general economy? Not at all. It points, instead, to the need to anticipate an overall sales decline while still targeting areas of higher demand. It also means wary electronics manufacturers should be even more deliberative as they plan for the year ahead. Batten down the hatches, certainly, as the market uncertainty deepens and sales fall off in some key market segments, but leave yourself open to the right opportunities.