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Slower-Than-Expected Growth Predicted for IT Spending

By Craig Galbraith
May 19, 2014 - News

The outlook for global information-technology spending isn’t as rosy as first thought.

International Data Corp. (IDC) has revised its prediction for the market, now expecting only 4.1 percent growth this year, down from its previous forecast of 4.6 percent. The number is also lower than the 4.5 percent growth that the market saw in 2013.

IDC says the crisis in Ukraine and the economic slowdown in China have added to the “general sense of uncertainty" which continues to impact business confidence and investment.

There is some pent-up demand, however, particularly in mature markets, where IDC says businesses will take advantage of a more stable business climate to replace aging infrastructure – servers, storage and network equipment. The troubles in Eastern Europe and Asia will also be somewhat offset by a stabilizing economy in some emerging markets, which will drive a period of what the research firm calls “catch-up spending."

The other weak spot in the economy has been the mobile-device market, partly due to market saturation and price erosion.

“As smartphone growth continues to cool from the phenomenal expansion of the past few years, tablet shipments have performed weaker than expected over the past couple of quarters," said Stephen Minton, vice president in IDC’s Global Technology & Industry Research Organization (GTIRO). “This volatility, coupled with the macroeconomic uncertainty in many emerging markets, is somewhat masking a more positive underlying foundation for enterprise IT spending, with firms continuing to invest in working off that pent-up demand to replace old servers, storage and network gear. Some of that spending is also driving IT services, despite the fact that an increasing number of businesses are moving more of their traditional IT budget to the cloud."

About 10 percent of software spending is expected to have moved to the cloud by the end of this year. Infrastructure-as-a-service will represent 15 percent of all spending on storage and servers, IDC said. It’s disrupting the market for IT vendors targeting traditional budgets, but it’s also driving short-term opportunities for vendors that capture interest in their cloud-based solutions.

IDC expects many businesses will take a gradual approach to the cloud, with security, reliability and regulatory factors in mind, implementing hybrid and private cloud solutions. Both cloud and traditional IT spending will benefit from these drivers in the next two to three years.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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