IT investment will fuel business growth

Investment in IT will continue to be crucial for future business growth, according to Deutsche Bank's chief economist.

Norbert Walter told delegates at software suppliers SAS's annual user conference in Vienna that the information age will carry on, although it will still be led by the US.

'The advice from financial analysts to fire people and cut costs in human resource as an answer for survival is rubbish,' he said.

'Outsourcing will become the name of the game as companies focus on reducing their transaction costs.'

Walter says the hardware industry will suffer, but the software industry will continue to grow. The main focus for the immediate future will be on making existing systems work better. 'The focus will shift from invention to implementation,' he said.

But the US will continue to dominate the world market, using its better universities, more efficient government regulations, younger labour force and availability of capital, he says.

Walter believes that the UK and Switzerland will both join the Euro eventually, but probably only after 2010. And he sees the expansion of market as crucial.

'The enlargement of the EU is very desirable. That is what will help to counteract the hyper-strength of the US,' he said.

But a major concern is the rising strength of the Euro. US firms such as SAS are keeping their European profits in Europe, growing dollar income off the back of the currency growth.

SAS chief executive Dr Jim Goodnight says he believes the value of the Euro will rise to $1.30 by the end of the year - a major concern for the international competitiveness of EU-based firms.