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U.S. dollar the villain behind dwindling IT spend

19 Jan 16

Worldwide IT spend fizzled in 2015 with the largest dollar drop since tracking began, according to industry analyst firm Gartner, who says $216 billion dollars less was spent on IT in 2015 than the year before.

Gartner is predicting 2014 spending levels will not be surpassed until 2019.

Spend for 2016 is forecast to total $3.54 trillion, just a 0.6% increase over 2015 spening of $3.52 trillion.

Gartner is blaming the rising U.S. dollar on the decline, labelling it the ‘villain’ behind the the 2015 results.

"U.S. multinationals' revenue faced currency headwinds in 2015. However, in 2016 those headwinds go away and they can expect an additional 5% growth,” says John_David Lovelock, research vice president at Gartner.

Table 1. Worldwide IT Spending Forecast (Billions of U.S. Dollars)

2015 Spending

2015 Growth (%)

2016 Spending

2016 Growth (%)

Data Center Systems

170

1.8

175

3.0

Software

310

-1.4

326

5.3

Devices

653

-5.8

641

-1.9

IT Services

912

-4.5

940

3.1

Communications Services

1,472

-8.3

1,454

-1.2

Overall IT

3,517

-5.8

3,536

0.6

Source: Gartner (January 2016)

Furthermore, the devices market (PCs, ultramobiles, mobile phones, tablets and printers) is forecast to decline 1.9% in 2016. According to Gartner, the combination of economic conditions preventing countries such as Russia, Japan and Brazil from returning to stronger growth, together with a shift in phone spending in emerging markets to lower-cost phones, is overlaid with weak tablet adoption in regions where there was an expectation of growth.

Ultramobile premium devices are expected to drive the PC market forward with the move to Windows 10 and Intel Skylake-based PCs. Gartner has slightly reduced the speed of adoption over the forecast period, as buying in Eurasia, Japan, and the Middle East and North Africa moves away from purchasing these relatively more expensive devices in the short term, but expect them to revert back to buying in 2017 as the economic environment stabilises.

Data center systems' spending is projected to reach $75 billion in 2016, a 3.0% increase from 2015. The server market is the segment that has seen the largest change since the previous quarter's forecast.

The server market has seen stronger-than-expected demand from the hyperscale sector, which has lasted longer than expected. Typically, this segment has spikey demand which lasts for a couple of quarters before moderating. Demand in this segment is expected to continue to be strong through 2016.

The worsening economic environment in emerging markets has had little effect on the global enterprise software spending forecast for 2016, with IT spending on pace to total $326 billion, a 5.3% increase from 2015. However, key countries in emerging markets, particularly Brazil and Russia, face escalating political and economic challenges.

Gartner says organisations in those regions must balance cost cutting with growth opportunities during times of economic concern.

Spending in the IT services market is expected to return to growth in 2016, following a decline of 4.5% in 2015. IT services spending is projected to reach 940 billion in 2016, up 3.1% from 2015. This is due to accelerating momentum in cloud infrastructure adoption and buyer acceptance of the cloud model, says Gartner.

Telecom services spending is projected to decline 1.2% in 2016, with spending reaching $1,454 trillion. The segment will be impacted by the abolition of roaming charges in the European Union and parts of North America. While this will increase mobile voice and data traffic, it will not be enough to counter the corresponding loss of revenue from lost roaming charges and premiums.

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