subscribe: Daily Newsletter

 

IT spending set for decline

0 comments
IT spending set for decline

Worldwide IT spending is on pace to total $3,5-trillion in 2015, a 5,5% decline from 2014. This is largely as a result of US dollar strength, according to the latest forecast by Gartner. In constant-currency terms, the market is projected to grow 2,5%. In Gartner’s previous forecast in April, it had predicted IT spending to decline by 1,3% in US dollars and grow by 3,1% in constant currency.

“We want to stress that this is not a market crash. Such are the illusions that large swings in the value of the US dollar versus other currencies can create,” says John-David Lovelock, research vice-president at Gartner. “However, there are secondary effects to the rising US dollar. Vendors do have to raise prices to protect costs and margins of their products, and enterprises and consumers will have to make new purchase decisions in light of the new prices.”

According to the Gartner Worldwide IT Spending Forecast, communications services will continue to be the largest IT spending segment in 2015 with spending at nearly $1,5-trillion. However, this segment is also experiencing the strongest decline among the five IT sectors. Price erosion and competitive threats are preventing revenue growth in proportion to increasing use within most national markets.

In the device market, mobile phones continue to be the leading segment, with growth in Apple phones, especially in China, keeping overall phone spending consistent. However, overall smartphone unit growth will start to flatten.

The PC and tablet market continues to weaken. The expected 10% increase in average PC pricing in currency-impacted countries is going ahead, delaying purchases even more than expected. Excessive PC inventory levels, especially in Western Europe, need to be cleared, which will delay Windows 10 inventory in the second half of the year.

Within the data centre systems segment, storage and network markets are both expected to see weaker growth in US dollar terms as a result of the appreciation of the dollar. Enterprise budgets for data centre systems in local spending are expected to remain stable for the year, with users expected to extend life cycles and defer replacements as a means of offsetting the price increases.

The overall near-term data centre weakness is slightly offset by a more positive outlook for the server market. The server market is benefiting from a stronger-than-expected mainframe refresh cycle, as well as increased expectations for hyperscale spending.

Enterprise software spending is forecast to decline 1,2% in 2015, with revenue totalling $310-billion. Gartner analysts said many software vendors will try not to raise prices because software as a service (SaaS) is about market share, not profitability. Raising prices could take software vendors out of a sales cycle, and these vendors don’t believe they can afford to lose a client.

IT services spending in 2015 is projected to decline 4,3%. Gartner expects modest increased spending on consulting in 2015 and 2016, as vendors have demonstrated their ability to stimulate new demand from buyers looking for help with navigating business and technology complexities, particularly related to building a digital business. However, the forecast for implementation services has been slightly reduced. Increasingly, buyers prefer solutions that minimize time and cost of implementation, driving demand for more-efficient delivery methods, out-of-the-box implementation, and lower-cost solutions.

“IT activity is stronger than the growth in spending indicates. Price declines in major markets like communications and IT services, and switching to ‘as a service’ delivery, mask the increase in activity,” says Lovelock.