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With economic uncertainty and volatility impacting business and consumer confidence, technology markets are in for a rocky ride over the next 18 months.
This is according to the latest Worldwide Black Book from International Data Corporation (IDC), a quarterly review of ICT spending in 89 countries, which found that ICT spending overall will increase by 3% this year in constant currency terms to $3,5-trillion, a slight improvement on last year’s 2% growth rate.
This is mainly due to improvements in emerging markets and a general pickup in infrastructure spending. IT spending (excluding telecommunications) will also grow by 3% this year.
Last year’s slow pace represented a significant slowdown from the 5% to 6% IT spending growth recorded from 2012-2015, and resulted from a slowdown in enterprise capital spending, weak consumer upgrades of PCs, phones, and tablets, and ongoing sluggishness in IT services.

Cloud will dominate
Cloud will continue to drive much of the ICT spending story, as more businesses move to adopt cloud services. This will continue to drive aggressive hardware spending by cloud service providers (CSPs), although the next major upgrade cycle will not begin until later in 2017.
From an end-user perspective, infrastructure-as-a-service (IaaS) spending will increase by 40% this year, accounting for an ever-increasing share of enterprise infrastructure budgets.
“The cloud has come to dominate the ICT market outlook in many ways,” says Stephen Minton, program vice president in IDC’s Customer Insights & Analysis group. “It drives capital spending cycles for hardware manufacturers and represents an increasing proportion of the customer base for server and storage vendors.
“From a software standpoint, software-as-a-service (SaaS) and platform-as-a-service (PaaS) already account for almost 20% of all software spending and rising, while cloud adoption is also driving increasing usage of telecom services and investment in network equipment.
“On the other hand, the cloud also continues to cannibalize from legacy 2nd Platform revenue streams, including traditional 0utsourcing services.”

Brexit impacts business confidence and visibility
The forecast for this year is partly driven by economic cycles, including Brexit and the gradual recovery in emerging markets. Brexit is impacting business confidence and visibility, and will inevitably have some effect on IT projects during the next two to three years as the UK begins the precarious process of negotiating its exit from the European Union.
IDC expects weaker infrastructure and IT services spending to result in overall IT spending growth in the UK of just 1% this year (down from 6% in 2016). The rest of Europe remains similarly fragile, and weak consumer spending will drag on growth in many European countries during this extended period of uncertainty.
“Europe is a wild card in terms of downside risks,” says Minton. “Brexit carries a wide range of potential scenarios, and our current baseline forecasts don’t represent the worst case. There are also downside risks in relation to the US, Japan, and China, which could have a negative impact on business confidence, if only because they will lead to an increased sense of caution with regards to major new projects while government policy remains uncertain.”

BRIC countries differentiated by tech trends and market opportunities
IT spending growth in China is expected to slow to 5% this year from 9% in 2016, and will decelerate further in the next two to three years as the economy goes through a period of transition and restructuring.
Other key emerging markets, however, are expected to show improving growth in 2017, including Brazil and Russia where technology spending was severely affected by economic downturn last year.
IT spending in Brazil will rebound from a 4% decline in 2016 to growth of 7% in 2017.
Russia will post a decline for the overall market, but this is mainly linked to weak sales of smartphones and PCs. Spending on enterprise infrastructure will rebound from a 5% decline last year to growth of 3% in 2017 before returning to double-digit growth in 2018, assuming the economic turnaround in Russia remains on track.
“The BRIC countries are no longer a homogenous grouping in terms of technology trends and market opportunities,” says Minton. “In China, infrastructure spending remains extremely strong, driven largely by government investments, but consumer spending has slowed.
“In Brazil and Russia, recovery will be gradual, in line with the overall economic cycle.
“India, meanwhile, will bounce back from a weak finish to 2016, when demonetisation had a negative effect on tech spending in the fourth quarter, with a return to double-digit growth in 2017.”

Emerging markets recovery drives next wave of IT spending opportunities
The next wave of IT spending opportunities increasingly lie beyond the BRICs, in emerging markets across Africa, the Middle East, Eastern Europe and Latin America.
The IDC Worldwide Black Book now covers ICT spending in 89 countries, and the latest forecasts show strong growth projected for the year ahead in countries such as Ghana, Namibia, Pakistan, Ecuador, and Ukraine. Key markets such as Nigeria, Morocco, and Iraq will also show improving trends.