PC decline whacks 2013 IT spending projections
The falling US greenback does its part, as well
We're now halfway through this year, and it's therefore time for Gartner's prognosticators to review what is going on in the global economy, how IT vendors fared in the first half, and to rejig their IT spending projections for 2013.
While the news is not good, it's not particularly bad, either.
According to Gartner, global IT spending is on track to grow a flat 2 per cent this year to $3.72 trillion. Three months ago, the projection was for IT spending to be up a fairly healthy 4.1 per cent to $3.78 trillion – but alas, that is not going to happen.
First, the PC market continues to lose air like a tire driving over a pile of nails. Second, the US dollar is shrinking. Gartner reckons IT spending in US dollars – and rightly or wrongly, most of the companies who make IT wares are headquartered in the United States even if they don't necessarily make their products here – and the weakening greenback drags down IT spending numbers.
But if you look at IT spending in constant currency rates from a year ago, then the global IT budget for hardware, software, and services will grow 3.5 per cent in 2013, down only a half point from the March spending estimates.
Another factor that hurts the comparisons is that Gartner has revised upwards the spending on IT stuff for 2012. In its March forecast, Gartner said companies consumed $3.62 trillion in various products and services (including corporate telecom services), and it raised its estimations of spending on devices (smartphones and tablets), enterprise software, and telecom services by more than it cut spending estimates for 2012 for data center systems and IT services, putting another $30bn into bucket. That ends up being around eight-tenths of a point of growth removed just by lifting the 2012 figure.
IT spending is cooling a bit thanks to the PC slump and the falling US dollar
"Exchange rate movements, and a reduction in our 2013 forecast for devices, account for the bulk of the downward revision of the 2013 growth," said Richard Gordon, the managing vice president at Gartner responsible for IT spending forecasts, in the statement. "Regionally, 2013 constant-currency spending growth in most regions has been lowered. However, Western Europe's constant-currency growth has been inched up slightly as strategic IT initiatives in the region will continue despite a poor economic outlook."
The big change in the July forecast put together by Gartner is that worldwide spending on end-user devices (related to business, and it has to be hard to draw those lines with everyone using their own gadgets these days) was cut back to 2.8 per cent growth, to a total of $695bn. The March forecast was expecting more like 7.9 percent revenue growth across PC, smartphone, and tablet devices used in the enterprise, to $718bn.
Even with tablet revenues forecast to grow by 38.9 per cent for all of 2013 and smartphone sales to rise by 9.3 per cent, it is not enough to counteract the downdraft for PC revenues, which Gartner did not provide a figure for in its publicly available report. PC shipments, however, are expected to drop by 10.9 per cent this year, based on the company's latest PC market forecast.
The other bit of bad news is that Gartner is shaving its projections for 2014 IT spending, and now thinks that it will be reduced by $42bn to $3.88 trillion.As you can see from the chart above, the Spreadsheet Effect is doing its magic in 2014. (That's an old joke from the early days of spreadsheets, when someone noticed that cash flow always seems to go positive six months out, reflecting the eternal optimism of most people.)
Spending on enterprise software is recovering here in 2013 and will continue at the current growth rate (more or less) into next year, and spending on both devices and data center gear will match that growth in 2014.
Interestingly, Gartner has boosted projections for spending on customer relationship management software and cut back on revenue expectations for operating systems and digital content–creation apps, both of which it says have been adversely affected by a switch to software as a service (SaaS) deployments at companies.
The global budget for IT services has been growing much more slowly than the IT market overall for several years, and shrank more last year than Gartner had reckoned in its March forecast. The money thrown at IT services is nearly as large of a pile as is dedicated to data center gear and enterprise software put together, so this is still a big part of the IT racket.
But the services sector is subject to intense competitive pressures, and in recent years also to hesitancy on behalf of corporate customers to do big blockbuster deals like they did in years past. You have to do a lot of little deals to get the big numbers now, and you have to stay on your toes.
This is probably better for customers, but probably not for vendors. ®
Sponsored: Today’s most dangerous security threats