Germany's lead in technology spending falters

IHT: "This year, German companies are forecast to spend €67.8 billion on information technology and communications, 3.7 percent less than last year and 7.8 percent less than in 2003, according to the market researcher Gartner. While Gartner sees growth returning in 2006, it expects German technology spending to rise just 0.4 percent a year through 2008, barely half of the 0.7 percent increase for all of Europe.

According to International Data Corp., using a slightly different calculation of spending, Germany has already lost its position as Europe's technology spending leader. Excluding telecommunications and measuring just computer hardware and software spending, Britain last year for the first time surpassed Germany as Europe's leader, buying €58.3 billion in goods compared with Germany's €57.2 billion, IDC said.

The reluctance to spend is starkest among small and midsize businesses. About 2.5 million German companies with fewer than 500 employees this year will spend €33.9 billion on technology, according to IDC, more than anywhere else in Europe. But fewer than half that number of companies in Britain - 1.1 million - will spend almost the same amount, €32 billion.

Experts blame Germany's weak domestic economy. The International Monetary Fund forecasts that the German economy will grow no more than 1.5 percent this year, after expanding 1.4 percent last year and an anemic 0.8 percent combined for the three years from 2001-2003. In February, the number of jobless hit 5.22 million, the most since 1945, and the adjusted jobless rate reached a seven-year high of 11.7 percent.

Based on a quarterly membership survey, demand for the products and services of Bitkom members from businesses, consumers and government agencies rose 2.6 percent in 2004 to €130.8 billion, exceeding the record €127.9 billion set in 2000. This year, Rohleder said demand is expected to rise 3.4 percent to €135.2 billion.

According to Rohleder, 75 percent of Bitkom's members expect to increase sales this year. They include Epson Deutschland, the German unit of the Nagano, Japan-based maker of color printers and digital video projectors. Henning Ohlsson, Epson Deutschland's country manager, said demand from Germany's largest companies was flat - and many were cutting spending. Last week, Kai-Uwe Ricke, the chief executive of Deutsche Telekom, hailed a "save for growth" program that has led Telekom to cut about 10,000 jobs a year since 1995.

It will be demand from small and midsize businesses, Ohlsson said, that will help Epson Deutschland increase sales this year by 3 percent to 4 percent. Epson made $2.84 billion in sales last year in Europe, the Middle East and Africa, 22 percent of its global sales. Germany, Austria, Switzerland, Eastern Europe and the Benelux accounted for about $625 million in sales, Ohlsson said. "We're seeing strong demand for color laser printers and digital video projectors," Ohlsson said.

In Bavaria, there are even signs that large companies may be beginning to spend again. Bardenheuer Software, a maker of communications software for Siemens, Motorola, T-Mobile and others, is expecting to increase its own sales by 20 percent this year to €6.4 million."