Global IT Spending Set To Decline To £2.5 Trillion

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Belt tightening? Data centre spending remains stable, but overall IT spending forecast to drop 0.5 percent according to Gartner

Vendors should prepare for a global decrease in overall IT spending as currency fluctuations and a “current of economic uncertainty” results in organisations tightening their corporate belts.

This is the gloomy prediction from analyst house Gartner, which said that global IT spending will decline 0.5 percent to $3.49 trillion (£2.5 trillion) in 2016, compared to $3.5 trillion (£2.5 trillion) in 2015.

Spending Decline

It should be noted that Gartner had predicted last quarter a modest 0.5 percent growth in this year’s IT spending, but it has now revised it down “mainly due to currency fluctuations.”

“There is an undercurrent of economic uncertainty that is driving organisations to tighten their belts, and IT spending is one of the casualties,” said John-David Lovelock, research vice president at Gartner.

“Concurrently, the need to invest in IT to support digital business is more urgent than ever. Business leaders know that they need to become digital businesses or face irrelevance in a digital world. To make that happen, leaders are engaging in tough cost optimisation efforts in some areas to fund digital business in others.”

IBMLovelock pointed out that typically, less than 10 percent of organisations are currently engaged in cost optimisation or cost cutting mode.

Gartner reported mixed growth rates across different IT sectors. The device market (PCs, mobile phones, tablets and printers etc) is forecast to decline 3.7 percent in 2016. It warned that the smartphone market is approaching global saturation, and the PC and ultramobile markets are also expected to decline.

But data centre spending remains robust and is projected to reach $175bn (£124bn) in 2016, a 2.1 percent increase from 2015. Gartner said that network upgrades had contributed to a stronger-than-anticipated 2015 for enterprise network equipment and this is expected to carry on into 2016.

But external-controller-based storage segment “continues to suffer from ongoing challenges.” It also predict that hyperscale demand will reduce in 2016, impacting the server segment, whilst the mainframe refresh will also abate in 2016, “inhibiting the overall growth figures.”

Enterprise software spending is apparently on pace to total of $321 billion (£228bn) in 2016, a 4.2 percent increase from 2015.

But Gartner said that its operating system forecast has been downgraded, as it expects further delays in the adoption of Windows 10 and Windows Server 2016.

There was good news for the IT services sector, as Gartner expects spending here to return to growth in 2016, reaching $929 billion (£660m), up 2.1 percent from 2015.

But spending for telecom services is projected to decline 2.0 percent in 2016, with spending reaching $1.4 trillion (£994bn). Mobile data however remains a bright spot with growth driven by improved pricing on bandwidth, mobile app and 4G/LTE network availability.

Last month Gartner warned that digital investments are proceeding slowly in governments around the world, in part due to skills shortages and organisational cultures focused on stability.

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