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Transformation

Gartner: Why we had to dash tech cash splash

The almighty dollar, the cloud, customers cutting costs...

Tech spending stats look quite respectable for 2016, but only in certain product areas or geographies and only in a constant currency basis.

Performing a classic flip-flop, Gartner today downgraded earlier forecasts by a whole percentage point, and told us it now expects customers to collectively find $3.49 trillion for new stuff this year – that is 0.5 per cent (or $100m) down on last year rather than 0.5 per cent up.

John-David Lovelock, research veep, said the strength of the US dollar versus other foreign exchange rates had largely forced Gartner's hand.

"For US multinationals, that negative growth is important, it talks to the number of dollars that they can repatriate," he told El Reg.

"There is demand and activity; they are still growing in one measure."

The forex phenomenon seen throughout 2015 forced American companies to raise their prices overseas to cover the cost of manufacturing and maintain a margin for Wall Street moneymen.

In US dollars, devices and comms services are predicted to shrink 3.7 and 2.0 per cent respectively to $626bn and $1.47tr.

Data center systems, software and IT services are forecast to expand by small single-digit percentages to $171bn, $306bn and $910bn respectively.

The other calculation measure Lovelock referred to is constant currency and in this sense the picture was remarkably different, though even here Gartner downgraded its latest forecast due to myriad factors.

"Digital business is a reality people are getting onto but they no longer have the revenue expectations to support a massive digital business, so there are these undercurrents of shifts going on in order to do it," Lovelock observed.

"We are shifting to cost optimization in both business and IT; we are shifting the way we develop products from mode one to mode two and embracing bi-modal strategies. We are going from owning things like servers and software licenses and personal systems and getting things as a service from what we are calling the digital services twin."

Constant Currency

In a constant currency, the industry is expected to expand 1.6 per cent. Devices is the only product category predicted to decline, and this is largely because smartphone refreshes in businesses are being postponed.

Data center systems are expected to rise four per cent as service providers continue to add hyperscale server capacity to their data centers, and areas including IoT, mobile app and big data will require compute power.

Software is expected to grow 5.9 per cent with the shift to SaaS, but Lovelock said it expected a drop in operating systems sales for the year. IT Services are forecast to rise 3.8 per cent and Comms by 0.5 per cent. ®

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