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IT industry's best bet is with government

Research firm IDC predicts that the government sector will be a promising source of business for technology companies this year.

Government should be a promising source of business for technology companies this year, according to research firm IDC.

In a presentation Thursday, IDC predicted that the public sector--defined as government agencies and educational institutions--will grow its information technology purchases faster than any other industry in the United States, with spending increasing 5.8 percent in 2004.

"The public sector is really the most attractive opportunity," IDC analyst Meredith Whalen said.

During the presentation, which focused on IT spending in various industries and regions of the globe, IDC also predicted that government will be the top sector worldwide when it comes to increasing IT dollars. Other industries with better-than-average growth worldwide included the retail-wholesale arena and banking and other financial services.

A number of reports have suggested that technology spending will improve in 2004. In December, IDC predicted IT spending will increase 6 percent to 8 percent or more. A study also released that month by the U.S. Commerce Department concluded that the U.S. information technology sector is bouncing back, but without the jobs.

One factor blamed on the grim job market for U.S. techies is the transfer of IT work to lower-cost locations such as India or China. IDC in December predicted that IT services provided to U.S. customers through offshore labor would double in 2004.

Whalen said government outlays on computers and the like should be especially healthy in the United States, growing nearly 8 percent. Spending on so-called e-government projects should jump 8.1 percent, according to IDC.

In the retail industry, Whalen suggested tech spending could be sparked partly by the emergence of radio-frequency identity (RFID) technology, controversial systems that promise improved tracking of inventory. "The big news for retail as we go into 2004 is RFID," Whalen said.

IDC expects RFID spending for U.S. retail supply chains to grow from $91.5 million last year to nearly $1.3 billion in 2008.