About 62.9% of spending will be dedicated to IT services.
A new report from International Data Corporation (IDC) says that annual IT spending by Western European utilities will be $10.4bn in 2013 and reach $12.7bn by 2017.
IDC said that out of the total spending about 62.9% will be dedicated to IT services, making it the largest share in total spending.
IDC said it expects software spending to grow CAGR 7.4%, reaching $3.2bn by 2017.
IT services are also anticipated to grow by an average of 4.9%, while the hardware sector will increase 0.7%, significantly below average period between 2012 and 2017
Packaged software and hardware are expected to account for 23% and 14.1% of IT spending, respectively.
Gaia Gallotti, insights research manager at IDC, said the prolonged economic downturn continues to take its toll on IT spending.
"More than ever utilities are striving to make the most of every dollar spent to achieve operational excellence, and reduce inefficiencies," Gallotti said.
"However, the need to comply with energy policies and regulation will continue to drive utilities ICT investments, translating into an estimated total Western European utilities’ 2012-2017 CAGR of 4.9%."