Date:07/04/16

Worldwide IT spending to drop 0.5 per cent this year

Gartner Inc. said Thursday it expects worldwide IT spending for 2016 to be $3.49 trillion, a 0.5% decline from 2015, and a downward revision from its fourth-quarter forecast for 2016. The research firm initially projected IT spending for the year to increase 0.5%.

The change was largely due to currency fluctuations, said John-David Lovelock, Gartner’s chief forecaster. Spending declines are expected to be sharpest in China, Brazil and Russia, he said. The downturn also reflects a broader shift by companies to refocus IT spending from “growth to cost optimization,” he told CIO Journal.

Cost optimization efforts are already redirecting IT spending patterns away from investing in assets, such as servers, to spending on services, like Infrastructure-as-a-Service – or what Mr. Lovelock refers to as the “digital service twins” of IT, in which a virtual service replaces physical equipment.

Mr. Lovelock said many companies are facing increasing market pressures to adopt digital business models, or “face irrelevance in a digital world.” Cloud-based services also tend to have lower up-front costs, compared to traditional IT tools, while spreading budget dollars out over recurring monthly fees. The forecast suggests that spending on devices is in fact heading lower.

By segment, spending on PCs, mobile phones, tablets, printers and other devices is expected to decline 3.7% to $626 billion, Gartner reported. Spending on data center systems is forecast to rise 2.1% to $175 billion, led by spending on enterprise network equipment upgrades.

Communications services, the forecast’s largest single segment, is expected to decline by 2% to $1.44 trillion. Global enterprise software spending is expected to increase 4.2% to $321 billion, but operating systems won’t be a top priority, though. Investments in that area likely will reflect delays in adoption of  Microsoft Corp.’s Windows 10 operating system, Gartner said.

Deanna Johnston, chief information officer at appliance maker Haier America, said senior IT managers often are “challenged with the goal to keep up innovation, while maintaining IT expenditures at a flat or improved level over the prior year,” she told CIO Journal. That can be especially tricky in a period of economic uncertainty, she added.

“Because we are in the consumer space, macro-economic conditions can reduce consumer spending, which can affect our profit plan and end up in tightened controls around spending,” she said.

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