SAN JOSE, Calif.--June 5, 2002--Worldwide IT spending for the manufacturing vertical market is projected to total $326 billion in 2002, a 5.5 percent increase from 2001 spending of $309 billion, according to Dataquest Inc., a unit of Gartner, Inc. Although growth in IT spending in the manufacturing vertical industry will be modest for the year, it is a positive change from the 1.3 percent contraction witnessed in the preceding year. The manufacturing industry will continue to experience single-digit growth through 2005, when spending will surpass $407 billion. "The economic recession and the end of the e-business bubble have compelled manufacturing enterprises to severely curb year-over-year increases in their IT budgets. In fact, some manufacturing sectors, such as the automotive industry, will continue to reduce their IT budgets this year," said Geraldine Cruz, senior analyst for Gartner Dataquest's IT services group. IT vendors need to contend with the sluggish growth in the market, but Gartner Dataquest analysts said they must develop strategies, solutions and execution plans to gear up for a resumption in IT demand when the economy rebounds. "IT vendors are at risk of losing mind share and market share if their portfolios consist only of cost-savings and productivity-enabling solutions," Cruz said. "Even in the midst of this economic downturn, the leading manufacturing companies continue to place the greatest importance on innovation, competitive advantage and customer satisfaction -- and not on productivity improvement projects. The challenge for IT vendors is balancing leaner operations to cope with the market realities today with the need to develop cutting-edge, forward-looking solutions for the future." With compound annual growth rates (CAGRs) of 13.3 percent and 10.8 percent, respectively, software and IT services are the fastest growing components of manufacturing IT spending over the forecast period of 2000 through 2005. IT services constitutes the largest single segment of IT spending by the manufacturing vertical market. Hardware and networking equipment are forecast to have CAGRs of 3 percent and 3.1 percent, respectively, over the forecast period. Gartner Dataquest defines and segments the manufacturing vertical market into two subsegments: discrete and process manufacturing. Discrete manufacturing includes the aerospace/defense, automotive, high-tech/electronics, and industrial machinery/equipment industries. Process manufacturing includes the chemicals/pharmaceuticals, petrochemicals, primary metals, printing/publishing, and food/beverage industries.