Analysts have predicted that IT demand in the western European business sector will grow 3.5 per cent in 2005 to reach a value of almost $302bn, while IT spending in the small and medium-sized business (SMB) sector is forecast to exceed $160bn.

However, according to the estimates from IDC, growth rates will vary across different sized segments and verticals, depending on the impact of IT spending drivers and/or inhibitors.

These include macroeconomic results, IT replacement/upgrade cycles, diverse pricing models and the availability of new IT solutions.

"Segmenting the market remains a crucial requirement for IT vendors targeting western European firms. But not even the most granular segmentation can reflect a precise picture of the SMB market," said Laura Converso, senior research analyst for the SMB sector at IDC European Vertical Markets.

"By definition this market is heterogeneous, geographically dispersed and traditionally served by the indirect channel with local presence in the proximity of the small firm."

The IDC study noted that SMBs (defined as having between one and 499 employees) represent just over half of total IT spending. This share is expected to increase to 54 per cent in the forecast period of 2004 to 2009 as demand for IT increases among companies with fewer than 500 employees.

The report also predicted that IT spending in small companies (defined as one to 99 employees) will increase at lower than average growth of 3.4 per cent in 2005 due to a more cautious approach to IT. However, demand is expected to scale up to 4.2 per cent in the next four years.

IT spending in the mid-market (100 to 499 employees) is anticipated to grow by four per cent in 2005 and climb to 5.3 per cent during the forecast period.

IDC said that strong demand for IT in the health and government sectors is anticipated to continue over the next five years.

Healthcare remains the most dynamic sector in the medium-sized business space, with 8.3 per cent growth in 2005 and eight per cent compound annual growth from 2005 to 2009.