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IDC - 2018 will see IT and telecom spending slowdown worldwide

25 Jun 18

Worldwide spending on traditional hardware, software, services, and telecommunications is on course to grow of 3.7% this year, slightly down from last year's 4.2%, according to the latest release of the ‘Worldwide Black Book: Standard Edition’ from IDC.

The report also shows that the market should reach $4 trillion in 2018.

However, a weakening economy related in part to tariffs, rising interest rates, and slowing growth in China, along with the end of a capital spending cycle, will see growth dip to less than 3% next year as tech spending lags behind GDP growth.

By 2022, annual spending will exceed $4.5 trillion with the strongest growth over this period coming from software and services related to 3rd Platform and digital transformation projects, while hardware investments will be led by cloud service provider spending on server/storage infrastructure.

Weaker growth is expected from PCs and tablets, peripherals, external storage systems, and traditional outsourcing.

Last year saw a significant rebound in spending on devices, driven by the improving economy and pent-up demand for PC upgrades.

The smartphone market performed better than forecast in terms of value, with price increases making up for slowing shipments in many countries.

Tablets continued to struggle but will return to modest growth in some countries over the next few years as premium and commercial devices begin to account for an increasing proportion of shipments.

Meanwhile, server/storage spending is increasingly driven by cloud hyperscale datacenter buildout but is also benefiting from a significant enterprise upgrade cycle related to product refreshes.

IT infrastructure spending, including network equipment, increased by 11% in 2017 and will continue to post annual growth in the range of 8-12% over the next five years even while spending on devices slows again.

"The infrastructure market is increasingly stable because a large proportion is now tied to the service provider model and overall demand for cloud services, which shows no sign of slowing down even in the event of a weakening economy," says IDC customer insights and analysis vice president Stephen Minton.

"To some extent, this spending will be more insulated against economic downturns than end-user capital spending, and therefore the IT market will be less vulnerable than it was in the past when any kind of GDP slowdown would translate into big declines for hardware spending. Nevertheless, economic risks are now higher than three months ago."

Other regions which posted improving growth in 2017 included Japan (+3%), Western Europe (+2%), Central & Eastern Europe (+3%), Canada (+5%), Asia/Pacific (excluding Japan) (+5%) and the Middle East/Africa (+2%). All of these regions benefited from improving business and consumer confidence, which enabled ICT buyers to work off the pent-up demand that had swelled during the prior years of subdued growth.

"Cloud and mobile are still the big drivers for traditional ICT spending, as legacy products and services like desktop PCs and fixed-line networks either stagnate or begin to decline," adds Minton.

"This means that while the overall market is broadly tracking GDP, there is a lot of variation by product category. cloud-related hardware, software, and services are posting strong rates of growth. For example, Infrastructure as a Service (IaaS) is expected to grow by another 37% this year and will continue to grow by around 30% per year over the forecast. This, in turn, will ensure that cloud service providers continue to invest in server/storage and network infrastructure.

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