Service providers and corporate users spent a significant amount of their IT capital budgets on network equipment in the first three months of the year, according to IDC's US IT Spending 2007-2011 Forecast.
"On the service-provider side, this investment is part of an overall strategy to roll out new services based on IPTV, fibre-based broadband access, next-generation wireless data and enterprise network services," according to the report. "Enterprises, meanwhile, are heavily engaged in projects relating to VoIP, mobile computing, geographic integration, intelligent networks and virtualisation, which are focusing attention on the network and driving investment in new equipment."
IDC said that although IT spending on network equipment is expected to slow in the coming months and years, overall spending on network equipment will increase by 12% in 2007, up from 8% in the fourth quarter of 2006.
In addition, IDC said spending on PCs will increase by 8% this year, up from 7.5% in the fourth quarter of 2006, in part because many companies are upgrading to Microsoft's Windows Vista operating system.
"The software market continues to drive overall IT industry growth," IDC said, adding that software spending will be up 9% this year, level with the forecast in the fourth quarter of 2006. "The strongest growth continues to come from system infrastructure segments, where overall growth this year will be 11% [up from 10% in the fourth quarter of 2006]."
However, spending on disk storage systems has slowed after the rapid rate of spending in the past two years, according to the report. IDC said spending on disk storage systems will increase by 4% this year and 3% in 2008.
In the server market, more companies are buying lower-cost systems at the expense of high-end, proprietary mainframes and servers, according to IDC.
Because more companies are standardising on Windows-Intel and open-source platforms, as well as investing in blade servers, the growth of these lower-cost servers will be 5% this year and 4% in 2008 versus overall growth for the server market, which will be 3% this year.
"Mid-range servers are experiencing a period of short-term investment this year, partly as a result of firms adopting some larger systems with a view to the rollout of virtualisation," according to the report. "This adoption of virtualisation, however, will be an inhibitor over the longer term as the overall server market struggles to maintain growth rates of more than 2% annually through 2011."
IDC said although IT spending was driven primarily by large corporations in 2006, this year's growth is expected to be stronger in the small-to-midsize businesses.
However, IT spending for the rest of 2007 will mostly be determined by the direction of the overall economy, according to the report. IDC said it expects the overall US market to increase by 6.9% this year, compared to the previous forecast of 6.3% growth in the fourth quarter of 2006.
"If the positive scenarios hold true, then larger firms will likely begin to loosen their purse strings and the 2008 outlook should remain solid, IDC said. "On the other hand, if negative economic scenarios become a reality, then the caution among larger firms will accelerate, resulting in a sharper downtick to corporate investment plans."