Worldwide IT Spending High at $3.7 Trillion, But Lower Than Last Forecast

Worldwide IT spending is on pace to total $3.7 trillion in 2014, a 2.1 percent increase from last year (see table), according to Gartner Inc.’s new Worldwide IT Spending Forecast.

Gartner table

Still, that figure fell from earlier projections of 3.2 percent growth. Gartner said the slower outlook for this year is due to lower demand for devices, data center systems and, to some extent, IT services.

“Price pressure based on increased competition, lack of product differentiation and the increased availability of viable alternative solutions has had a dampening effect on the short-term IT spending outlook,” said Richard Gordon, managing vice president at Gartner.

But there’s a silver lining. From 2015-2018, the industry “will see a return to ‘normal’ spending growth levels as pricing and purchasing styles reach a new equilibrium,” Gordon said. “IT is entering its third phase of development, moving from a focus on technology and processes in the past to a focus in the future on new business models enabled by digitalization.”

Here’s a breakdown by market:

  • Devices. Gartner expects this segment, which includes PCs, ultramobiles, mobile phones, tablets and printers, to grow in 2014, although not as much as predicted in the previous quarter’s forecast. Now, Gartner said totals will reach $685 billion, a 1.2 percent increase from 2013, because of lower prices for mobile phones and tablets.
  • Data center systems. Spending within this sector should reach $140 billion in 2014, a 0.4 percent increase from 2013, Gartner said. Constrained spending levels continue to negatively impact the revenue opportunity for data center systems, particularly with external controller-based (ECB) storage, which is suffering from the combined effects of underused systems in the installed base, as well as lower-cost alternative architectures and cloud-based storage. The server market also shows weakness as enterprises migrate away from high-cost platforms toward lower-cost alternatives, said Gartner. Meanwhile, the hyperscale segment, primarily driven by consumer-oriented services, does provide some positive drivers to the market, albeit for very low-cost platforms, which further impacts overall spending levels on data center systems.
  • IT services. This portion of the industry is forecast to total $967 billion in 2014, up 3.8 percent from 2013. Following weak vendor performance in 2013 across multiple geographies and segments, modestly improved spending is expected through 2014. IT outsourcing is growing slower than expected as sharply reduced pricing by the largest vendors is impacting the cloud storage services market. In addition, public cloud services are proving increasingly cannibalistic to more traditional data center outsourcing services. Implementation services also are growing slower than expected as risk-averse buyers remain focused on smaller, safer projects and some of the largest sellers remain focused on maintaining margins over growing revenue.
  • Enterprise software. Here, spending is on pace to total $321 billion, a 6.9 percent increase from 2013. Slightly increased growth expectations for infrastructure software are balanced out by slightly lower growth expected for applications software, Gartner said. Within infrastructure, the database management system (DBMS) software market is expected to see strong growth as big data and digitalization initiatives drive DBMS adoption. Slower growth is expected in the applications market, specifically office suites and digital content creation (DCC), which are being impacted by slow PC sales and the rapid move to cloud-based offerings.
  • Telecom services. Finally, spending in this sector is projected to grow 0.7 percent in 2014, with spending reaching $1.635 trillion.

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