Corporate tech spending seen growing in 2006

By Philipp Gollner

New York (Reuters) - Global spending on information technology, from data storage to computer consulting, will pick up in coming years as companies and governments upgrade networks and focus on security, say top industry executives.

Increased government spending on health care, military technology and security is driving demand for consulting from computer services companies, including Computer Sciences Corp. (CSC.N: Quote, Profile, Research, Stock Buzz) and Electronic Data Systems Corp.EDS.N.

At the same time, growing mountains of corporate data -- financial information, documents and e-mails -- are fueling purchases of storage systems from vendors like EMC Corp. (EMC.N: Quote, Profile, Research, Stock Buzz) and International Business Machines Corp. (IBM.N: Quote, Profile, Research, Stock Buzz).

"People are feeling good about their ability to spend in 2006," said Bill Teuber, chief financial officer of EMC, the biggest data storage company, at the Reuters Global Technology, Media and Telecoms Summit this week.

"Companies are starting to roll out new applications whereas in the past they had been reticent," he said in New York.

Market researcher IDC forecast global technology spending to increase an average 4.5 percent annually to $1.3 trillion by 2009. In the United States, tech spending should reach $496.7 billion by 2009, IDC reported earlier this month.

Government, health care, media and communications will be among the biggest spenders, IDC said. The U.S. government alone is seen spending $43 billion by 2009 on information technology as it hands over much of the work previously done by public agencies to private companies.

"We get the sense that it's still a strong, resilient world out there," said Chu Woosik, senior vice president of Samsung Electronics Co. Ltd, (005930.KS: Quote, Profile, Research, Stock Buzz), a major supplier of memory chips and cellphones.

"We find a very strong market, we see a very firm intention of the corporate sector to spend more," said Chu in Hong Kong. "That is why overall IT demand, despite some of the concerns (about an economic slowdown in the U.S.), has been quite resilient."

BIG SPENDERS

El Segundo, California-based Computer Sciences Corp. (CSC) is angling for more government contracts as agencies increasingly replace aging employees with private-sector contractors.

CSC expects double-digit percentage growth in its federal government business, which accounts for a third of total revenue of about $14 billion reported in fiscal 2005. Among the bigger drivers of demand are security and health care, said James Sheaffer, president of CSC's federal sector business.

The U.S. Department of Homeland Security requires sophisticated technology to track and deter would-be terrorists, while U.S. health agencies are beginning to digitize medical records, he noted.

"The U.S. federal health care market is probably the biggest health care market in the world," Shaeffer said in New York.

Plano, Texas-based EDS, the world's second-largest information technology outsourcing company, sees increasing complexity in data centers driving demand for consulting.  Continued...