World IT spending to slump in 2016 says Gartner

Worldwide IT spending is forecast to total $3.49 trillion in 2016, a decline of 0.5 percent over 2015 spending of $3.5 trillion, according to analyst Gartner. This is down from last quarter’s forecast of 0.5 percent growth. The change in the forecast is mainly due to currency fluctuations, said the analyst house.

“There is an undercurrent of economic uncertainty that is driving organisations to tighten their belts, and IT spending is one of the casualties,” said John-David Lovelock, an analyst at Gartner. “Concurrently, the need to invest in IT to support digital business is more urgent than ever. Business leaders know that they need to become digital businesses or face irrelevance in a digital world.

“To make that happen, leaders are engaging in tough cost optimisation efforts in some areas to fund digital business in others.”

Lovelock said: “As an example, the savings from legacy system optimisation and enhancements are being redirected to fund digital initiatives. It’s about doing more with the same funds. Typically, less than 10 percent of organisations are in cost optimisation or cost cutting mode. However, the need to spend on digital business initiatives in a time when revenue growth does not support runaway IT budgets is forcing more organisations to optimise as a first step.”

The most evident results of these optimisation efforts are in the switches in spending between assets and services. “Most traditional IT now has a ‘digital service twin’ — license software has cloud software, servers have infrastructure as a service, and cellular voice has VoLTE,” said Lovelock.

“Things that once had to be purchased as an asset can now be delivered as a service. Most digital service twin offerings change the spending pattern from a large upfront payment to a smaller reoccurring monthly amount. This means that the same level of activity has a very different annual spend.”

The device market (PCs, ultramobiles, mobile phones, tablets and printers) is forecast by Gartner to decline 3.7 percent in 2016. The smartphone market is approaching global saturation, slowing growth. The PC and ultramobile markets are expected to decline. The underlying reasons are a combination of factors and are geography-specific, and the worsening economic conditions in many countries only serve to amplify the impact of these factors, said the analyst.

Data centre systems’ spending is projected to reach $175 billion in 2016, a 2.1 percent increase from 2015. This top-level relative stability masks some changes within the segments – enterprise network equipment had a stronger than anticipated 2015 as a result of network upgrades, and this is expected to carry on into 2016.

But the external controller-based storage segment continues to suffer from ongoing challenges. In the server segment, demand from hyperscale buyers is expected to reduce in 2016. The mainframe refresh, which benefited the market in 2015, is expected to abate in 2016, also inhibiting the overall growth figures.

Global enterprise software spending is on pace to total $321 billion, a 4.2 percent increase from 2015. The operating system forecast has been downgraded, reflecting Gartner’s expectation for further delays in the adoption of Windows 10 and Windows Server 2016.

Spending in the IT services market is expected to return to growth in 2016, totalling $929 billion, up 2.1 percent from 2015.

Telecom service spending is projected to decline 2.0 percent in 2016, with spending reaching $1.4 trillion.

@AntonySavvas