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Gartner’s latest forecast for worldwide IT spending is expected to reach $3.7 trillion in 2014, a 2.1 percent increase from last year; however, the growth rate is still lower than an earlier projected growth rate of 3.2 percent. The slower outlook for 2014 is tied to a reduction in growth predictions for devices, data center systems and IT services.

“Price pressure based on increased competition, lack of product differentiation and the increased availability of viable alternative solutions has had a dampening effect on the short term IT spending outlook,” said Richard Gordon, Gartner’s Managing Vice President.

“However, 2015 through 2018 will see a return to ‘normal’ spending growth levels as pricing and purchasing styles reach a new equilibrium. IT is entering its third phase of development, moving from a focus on technology and processes in the past to a focus in the future on new business models enabled by digitalization.”

Table 1. Worldwide IT Spending Forecast (Billions of U.S. Dollars)

 

2013
Spending

2013
Growth (%)

2014
Spending

2014
Growth (%)

2015
Spending

2015
Growth (%)

Devices 677 1.1 685 1.2 725 5.8
Data Center Systems 140 -0.1 140 0.4 144 2.9
Enterprise Software 300 5.1 321 6.9 344 7.3
IT Services 932 0.0 967 3.8 1,007 4.1
Telecom Services 1,624 -1.2 1,635 0.7 1,668 2.0
Overall IT 3,673 0.0 3,749 2.1 3,888 3.7

Source: Gartner (June 2014)

The device market, including PCs, ultramobiles, mobile phones, tables and printers, is predicted to grow in 2014 but also at a lower rate than predicted in the previous quarter’s forecast, reaching $685 billion and increasing 1.2 percent from 2013.

One of the factors affecting this change comes from the lower price ranges expected across mobile phones and tablets. As tablet penetration reaches 50 percent in U.S. households, sales of high-end tablets will decrease with future adopters preferring lower priced utility tablets. Lower price points will result from the accessibility of basic tablets and utility tablets.

In 2014, data center systems spending is estimated to reach $140 billion, a 0.4 percent increase from the previous year. Data center systems continue to be affected by constrained spending levels, particularly with external controller-based (ECB) storage.

According to Gartner, ECB storage spending is suffering from the combined effects of underutilized systems in the installed base, as well as lower-cost alternative architectures and cloud-based storage. Another weakness is seen in the server market as enterprises move from high-cost platforms to more affordable alternatives.

Nonetheless, the hyperscale segment, mostly driven by consumer-oriented services, shows potential positive drivers in the market even for low-cost platforms.

Next, IT services is forecast to total $967 billion in 2014, increasing 3.8 percent from 2013. After weak vendor performance in 2013 throughout various segments across the globe, decent improved spending is predicted this year.

Outsourcing in IT is slowly shrinking with dramatic reduced pricing by large vendors, impacting the cloud storage services market. In addition, public cloud services continue to move away from more traditional data center outsourcing services. Implementation services are also growing slower than expected.

In the enterprise software market, spending is projected to total $321 billion, a 6.9 percent increase from 2013. According to Gartner, slightly increased growth expectations for infrastructure software are offset by slightly lower growth expected for applications software.

Within infrastructure, big data and digitalization in database management system (DBMS) software will provide strong growth in the market. Slower growth is expected in the applications market, specifically office suites and digital content creation (DCC), largely affected by slow PC sales and the rise of cloud services.

Lastly, Telecom services spending is projected to grow 0.7 percent in 2014, with spending reaching $1,635 trillion.Through 2013, voice average revenue per user (ARPU) will drop nearly 10 percent annually as the use of consumer voice services declines, especially within prepaid users.

“Increased competition between communication services providers is leading to price competition,” said Mr. Gordon. “Emerging low-cost or free/advertisement-subsidized mobile data services and low-cost services from mobile virtual network operators that target less-lucrative segments are impacting ARPU more than initially expected.”

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