February 17, 2016 by Canadian Underwriter
Worldwide IT spending is expected to post a major slowdown in 2016, as economic weakness in emerging markets and saturation of the smartphone market combine to result in a significantly slower pace of tech spending growth compared to the past six years, according to the International Data Corporation (IDC).
IDC – a provider of market intelligence, advisory services and events for the IT, telecommunications and consumer technology markets – said in a press release on Wednesday that the global IT market has posted annual growth of 5-6% in constant currency terms since recovery from the financial crisis in 2010. This year, the global IT market is expected to increase by just 2% in constant currency.
Total IT spending on hardware, software and services will reach US$2.3 trillion in 2016, IDC said. Including telecom services, total ICT (information and communications technology) spending will increase by 2% to US$3.8 trillion.
IT spending was relatively stable in 2015, in spite of the volatile economy, propelled by another strong year for smartphone shipments, which compensated for a weakening PC market throughout the year, IDC said in the release. Smartphones accounted for half of the overall industry growth rate of 6% in 2015. Spending on cloud infrastructure was also strong throughout the year, resulting in growth of 16% for the server market and 10% for storage systems. Enterprise spending on software, including SaaS (software as a service), posted healthy growth of 7%, with strong investment in analytics, security, and collaborative applications.
“Aside from exchange rate volatility, IT spending has been relatively stable for the past five years,” said Stephen Minton, vice president with IDC’s Customer Insights and Analysis group. “Excluding mobile phones, overall tech spending has continued to grow at 3-4% each year in constant currency terms since we recovered from the disruption of the financial crisis. A solid PC upgrade cycle in 2014 was followed by a major cycle of infrastructure spending in 2015, mostly driven by cloud. IT buyers continue to prioritize software investments like data analytics and enterprise mobility, and have increasingly leveraged the service provider model in order to increase the effectiveness of their IT budgets. Underlying buyer sentiment is strong.”
IT spending in China has been a growing source of revenue for tech vendors in recent years, and the market grew by 11% in constant currency terms last year, driven by strong growth in smartphones and cloud infrastructure, IDC reported. However, IDC said that it “see signs of increasing maturity in the smartphone market after the phenomenal growth of the past seven years, and this is now expected to result in overall IT spending posting its first -ever decline (of -0.3%).”
IT spending in the United States is currently expected to remain broadly stable, “assuming there are no significant disruptions to the broader economy.” The U.S. IT market is forecast to increase by 4% for the fourth consecutive year, in spite of an expected decline in the PC market and weakening growth in servers and storage. U.S. businesses continue to invest strongly in 3rd platform solutions around Big Data, cloud, mobile and social. The “new normal” of 4% annual growth in IT spending is likely to continue in 2017, assuming the overall economy remains in line with current expectations.