Earth's anemic IT budgets to bounce back in 2013 - Gartner

Now that the US Congress has avoided going over the fiscal cliff, at least for now, the prognosticators at Gartner are ready to talk about IT spending last year and make some projections for the next two years.

Worldwide IT spending increases were pretty anemic as IT and telecom services spending were seriously curtailed last year. Spending on data center equipment, various kinds of endpoint computing devices, and enterprise software running on that data center equipment and on those devices all did considerably better.

As always, the relative strength and weakness of the US dollar, in which global IT spending is reckoned by Gartner, has as much of an effect on the numbers as does the relative strength or weakness of the 180 or so economies in the world that have appreciable spending on IT wares.

The good news is that IT spending was up last year, despite slowdowns in a few Europe countries and the United States and a blip in China and despite the transitions from PCs to tablets and smartphones. Or, more accurately in many cases, the transition that is seeing people add a snazzy tablet or smartphone and keep their existing PC around for a while longer. Gartner reckons that overall IT spending in 2012 rose by 1.2 per cent to $3.588tr.

"Uncertainties surrounding prospects for an upturn in global economic growth are the major retardants to IT growth," said Richard Gordon, managing vice-president at Gartner and the guy who does the IT spending forecasts, in a statement.

"This uncertainty has caused the pessimistic business and consumer sentiment throughout the world. However, much of this uncertainty is nearing resolution, and as it does, we look for accelerated spending growth in 2013 compared to 2012."

What went wrong?

This time last year, Gartner had been projecting a 3.7 per cent increase in IT spending for 2012 to $3.796tr, and several times last year the market researcher's economists took the scissors to the forecast not only because of issues relating to the hard disk drive shortage because of flooding in Thailand, which slowed down PC and server sales alike (or gave vendors a convenient excuse for poorer than expected sales if you are a cynic), and because of the continuing decline in the value of the US dollar, which has the effect of pumping up sales figures outside of the United States.

Some of the reduction in IT spending growth in 2012 was also attributed to revisions that Gartner did to raise 2011's IT spending levels, and there is a good chance that after reviewing the fourth quarter financial results for the major IT players that Gartner could revise the 2012 numbers. Gartner and its rivals IDC and Forrester Research make these projections so IT shops and IT vendors alike can anticipate the sales landscape in the coming year and reckon how they are doing against their peers, and that sometimes means making projections before all the numbers are in.

Below are Gartner's latest predictions.

	2012		2013		2014
	Spending ($bn)	Year-on-year growth (%)	Spending ($bn)	Year-on-year growth (%)	Spending ($bn)	Year-on-year growth (%)
Devices	627	2.90	666	6.30	694	4.20
Data Center Systems	141	2.30	147	4.50	154	4.20
Enterprise Software	278	3.30	296	6.40	316	6.80
IT Services	881	1.80	927	5.20	974	5.10
Telecom Services	1,661	-0.10	1,701	2.40	1,742	2.40
Overall IT	3,588	1.20	3,737	4.20	3,881	3.80

To help make distinctions between the IT gear that gets plunked in data centers and the IT gear we use on our desktops and in our hands, Gartner has broken the computer hardware category that it has traditionally tracked into two new categories: devices and data center systems. Now we can see that the spending on devices is more than four times that in the data center, and moreover, we can see that spending on devices – PCs, smartphones, tablets, thin clients, and printers – actually rose in 2012 at a faster clip than spending on data center gear, which includes servers, storage, and switches.

Perhaps more importantly, as you can see in the chart above, Gartner is projecting that spending on endpoint devices will accelerate this year, out pacing data center system spending growth. In 2014, Gartner thinks that spending across these two broad categories will lockstep at about 4.2 per cent more than 2013's levels.

What you can't see in the above data is that Gartner has cut its forecast for device spending, which had pegged at rising 7.9 per cent in 2013 to $706bn in a forecast it did last fall. Gartner also has cut its forecasts for device spending in the next couple of years, too.

Decreased spending on PCs and tablets is only being partially offset by increases in smartphones and printers, according to Gartner. "The tablet market has seen greater price competition from Android devices as well as smaller, low-priced devices in emerging markets," said Gordon. "It is ultimately this shift toward relatively lower-priced tablets that lowers our average selling prices forecast for 2012 through 2016, which in turn is responsible for slowing device spending growth in general, and PC and tablet spending growth in particular."

Enterprise software spending is about twice that of data center hardware and about half that of spending on devices, but is anticipated to grow faster than either in 2012 at 3.3 per cent, reaching $278bn. Growth in software spending in 2013 and 2014 is projected to accelerate, thanks in part to the uptake of big data tools for integrating and chewing different kinds of informtion for new kinds of applications. While this market is currently relatively small, compared to the core operating system, database, middleware, and enterprise application areas, it is growing fast.

On the services front, Gartner tracks traditional IT services and telecom services separately, and the latter is nearly half of the overall IT budget globally. IT services spending – outsourcing, system integration, cloud, and so on – hit $881bn globally last year, up 1.8 per cent and is expected to rebound to hit $974bn by 2014. Telecom services spending, which has been curtailed in the past few years, only grew by a tenth of a point in 2012, to $1.661tr, but Gartner projects spending on mobile data services to grow enough to more than compensate for declines in fixed and mobile voice revenues. ®