Spending on information technology worldwide is expected to see little growth in 2016, although organizations will pony up more for data center technology, software, and IT services. Those are among the conclusions of Gartner, which yesterday released its Worldwide IT Spending Forecast for 2016.
According to Gartner, worldwide IT spending is forecast to total $3.54 trillion dollars in 2016. That is just a 0.6 percent increase over 2015 spending of $3.52 trillion dollars. Last year saw the largest U.S. dollar drop in IT spending since Gartner began tracking IT spending, the firm noted: $216 billion dollars less was spent on IT in 2015 than in 2014, and 2014 spending levels won’t be surpassed until 2019.
"The rising U.S. dollar is the villain behind 2015 results," said John-David Lovelock, research vice president at Gartner. "U.S. multinationals' revenue faced currency headwinds in 2015. However, in 2016 those headwinds go away and they can expect an additional 5 percent growth."
The Gartner Worldwide IT Spending Forecast is a leading indicator of major technology trends across the hardware, software, IT services and telecom markets, Lovelock noted. “For more than a decade, global IT and business executives have been using these highly anticipated quarterly reports to recognize market opportunities and challenges, and base their critical business decisions on proven methodologies rather than guesswork,” he said.
There is some good news in the report. Data center systems' spending is projected to reach $75 billion in 2016, a 3.0 percent 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, Lovelock explained.
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 percent increase from 2015. However, key countries in emerging markets, particularly Brazil and Russia, face escalating political and economic challenges. Organizations 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 percent in 2015. IT services spending is projected to reach 940 billion in 2016, up 3.1 percent from 2015. This is due to accelerating momentum in cloud infrastructure adoption and buyer acceptance of the cloud model.
The not-so-good news: The devices market (PCs, ultramobiles, mobile phones, tablets and printers) is forecast to decline 1.9 percent in 2016.
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, Lovelock said.
“Ultramobile premium devices are expected to drive the PC market forward with the move to Windows 10 and Intel Skylake-based PCs,” Lovelock said. 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 stabilizes.
Telecom services spending is also projected to decline in 2016, by 1.2 percent, with spending reaching $1,454 trillion. Lovelock said this 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, he explained.
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