Despite what had been a series of positive IT spending forecasts heading into 2016, a darker reality is emerging, with the latest study predicting a major slowdown in IT spending this year. Still, organizations continue to invest significantly in analytics.
Worldwide IT spending had been posting annual growth of 5 percent to 6 percent since recovery from the financial crisis in 2010, according to research firm International Data Corp (IDC). But the global IT market is expected to increase by just 2% this year (in constant currency), the firm says.
Total IT spending on hardware, software and services will reach $2.3 trillion in 2016, according to IDC. Including telecom services, total ICT spending will increase by 2% to $3.8 trillion, according to the latest data from the (IDC) Worldwide Black Book.
IDC cited a number of factors for the slowdown, including economic weakness in emerging markets and the saturation of the smartphone market.
The IDC report notes that IT spending was relatively stable in 2015, “in spite of the volatile economy, propelled by another strong year for smartphone shipments, which compensated for a weakening PC market throughout the year.”
Indeed, smartphones accounted for half of the overall industry growth rate of 6% in 2015, according to the research firm. Spending on cloud infrastructure was also strong throughout the year, resulting in growth of 16% for the server market and 10% for storage systems.
Enterprise spending on software, including SaaS, posted healthy growth of 7% with strong investment in analytics, security, and collaborative applications.
However, the strong US dollar made 2015 an uncomfortable year for US-based IT companies. In US dollar terms, the overall IT market declined by 2% last year, and exchange rate volatility remains a wild card which could influence the fortunes of IT suppliers over the next 12 months, the report states.
"Aside from exchange rate volatility, IT spending has been relatively stable for the past five years," says Stephen Minton, vice president with IDC's Customer Insights and Analysis group.
"Excluding mobile phones, overall tech spending has continued to grow at 3-4% each year in constant currency terms since we recovered from the disruption of the financial crisis,” Minton notes. “A solid PC upgrade cycle in 2014 was followed by a major cycle of infrastructure spending in 2015, mostly driven by cloud. IT buyers continue to prioritize software investments like data analytics and enterprise mobility, and have increasingly leveraged the service provider model in order to increase the effectiveness of their IT budgets. Underlying buyer sentiment is strong."
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