Worldwide IT spending is expected to grow at a slower pace of 2.1 per cent at $3.7 trillion in 2014, on account of reduction in growth expectations for devices, data center systems and IT services, according to the latest forecast by research firm Gartner.
This growth rate is lower than the earlier projections of 3.2 per cent growth, Gartner said. “Price pressure based on increased competition, lack of product differentiation and increased availability of viable alternative solutions has had a dampening effect on the short term IT spending outlook,” Gartner Managing Vice President Richard Gordon said.
The downgraded forecast isn’t necessarily a cause for concern, said Richard Gordon in an interview. “Customers aren’t necessarily cutting back on spending. They’re getting better deals for their money and spending their money carefully,” added Gordon.
We will see a return to ‘normal’ spending growth levels in 2015 through 2018 as pricing and purchasing styles reach a new equilibrium, according to Gordon. “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.”
Below is a verbatim reproduction of the Gartner press release:
The device market
The devices market (including PCs, ultramobiles, mobile phones, tablets and printers) is forecast to grow in 2014, but not as much as predicted in the previous quarter’s forecast, reaching $685 billion, a 1.2 percent increase from 2013. This is due to lower price points expected across mobile phones and tablets. As tablet penetration reaches 50 percent in U.S. households, sales of high-end tablets will decrease, with the next wave of adopters more attracted to lower priced utility tablets. The result is the mix of tablets shifting from basic tablets to utility tablets resulting in lower price points.
Data Center Systems
Data center systems spending is projected to reach $140 billion in 2014, a 0.4 percent increase from 2013. Constrained spending levels continue to negatively impact the revenue opportunity for data center systems, particularly with external controller-based (ECB) storage. ECB storage spending is suffering from the combined effects of underutilized 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. 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 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 are also 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.
In the enterprise software market, 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. Within infrastructure, the database management system (DBMS) software market is expected to have strong growth as DBMS adoption is driven by big data and digitalization initiatives. 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 by many organizations and professionals.
Telecom services spending is projected to grow 0.7 percent in 2014, with spending reaching $1,635 trillion. Voice average revenue per user (ARPU) will decline by about 10 percent annually through 2018 because of a decline in consumer use of voice services — particularly among prepaid users. “Increased competition between communication services providers is leading to price competition,” said Mr. Gordon. “Emerging low-cost or free/advertisement-subsidized mobile data services and low-cost services from mobile virtual network operators that target less-lucrative segments are impacting ARPU more than initially expected.”
***The Gartner Worldwide IT Spending Forecast is the leading indicator of major technology trends across the hardware, software, IT services and telecom markets.