Gartner in its latest report predicts that worldwide IT spending in 2016 will flatline and amount to 0.0 per cent growth as compared to the previous year. And the change has been attributed to rapid rise of the U.S dollar as compared to other currencies around the world.
Though seeing the figure o.o per cent would be saddening, but as they say there’s a silver lining to everything. The flat growth prediction might a let down, but it’s a rebound as compared to the 6 per cent decline in IT spending in 2015. And it is also better than the -0.5 percent growth that had been predicted in previous quarter’s report.
The overall IT spending totals at $3.41 trillion, and varies greatly depending on the geography. The largest region for total IT spending in 2016 still remains North America, with $1.18 trillion. However, the fastest-growing region is Emerging Asia/Pacific, followed closely by Africa. This in one-way could be attributed to the growing rivalry between Didi Chuxing and Uber, who’re spending money like there’s no tomorrow. And the flood of fintech startups in Singapore, India and Thailand.
In addition to this, the previous forecast report assumed that U.K wouldn’t exit the European Union, but was wrong about it. So to re-iterate its stance on the effect of brexit on global technology industry, John-David Lovelock, research Vice President at Gartner adds that,
With the UK’s exit, there will likely be an erosion in business confidence and price increases which will impact the UK, western Europe and worldwide IT spending.
The impact of brexit on IT spending in the U.K will be evident very quickly. Lovelock believes that staff will be the immediate issue and the long-term uncertainity in work status will make soon U.K less attractive to foreign workers. So, retaining current staff and diminished access to qualified new hires from abroad might impair U.K’s IT department.
In addition to the overall slight positive change to the forecasts, there has been some notable changes in certain market sectors as well. And to understand the same, we’ll first need to know the difference between current dollars and constant currency.
Current Dollars can be defined as the dollar revenue that IT vendors can expect to realize from IT spending based on projected exchange rates. While, on the other hand, Constant Currency is calculated assuming exchange rates fixed at a level in a given year.
Though there is not much variation in total spending figures, but here the most notable sector forecast changes:
- Data center systems: It is expected to witness a 2% increase in spending and may touch $175 billion this year. The long term forecast for this market sector is expected to remain relatively constant though spending levels might see a decrease. The user demand for this segment is expected to stay robust, because of the shift towards software-defined storage and cloud delivery. A change in these two factors will be responsible for future iterations in the forecast.
- Enterprise Software: Gartner has revised the software segment growth figures and now shows a 1.2% increase from the 1Q’16 update. It now predicts that the market will grow by 7.0%, amounting to a total of $332 billion in 2016. The office market has now crossed the tipping point in cloud adoption and it is now growing faster than previously expected. But at a segment level, the fastest-growing market still continues to be customer relationship management(CRM) software. You go, Salesforce!!
- Devices: This market will experience slow-down and see a reduction in end-user spending to $708 billion in 2016. This is a 3.6 per cent degradation as compared to 2015. Gartner in a previous report has also predicted that global smartphone sales are estimated to reach 1.5 billion units in 2016. The total mobile phone market is forecast to reach 1.9 billion units in 2016. This also sheds light on the fact that the free Windows 10 upgrade in extension of PC lifelines.
- IT Services: In the latest forecast, Gartner has revised its stance on the spending in the IT services segment. The spending is now is expected to increase 4.7%, totaling $898 billion as compared to 3.8% growth expected last quarter. Japan is seen as the fastest-growing region for IT services spending with over 8.9% growth.
Lovelock sums up the financial picture of 2016 till date and concludes by saying that,
2016 marked the start of an amazing dichotomy. The pace of change in IT will never again be as slow as it is now, but global IT spending growth is best described as lackluster.