Worldwide IT spending to decline 1.3%, however
Decline caused by rising US dollar, not a ‘crash’
MALAYSIA’S IT spending is expected to increase to RM65.1 billion (US$17.9 billion) in 2015, a 7.5% rise from last year, according to the latest forecast by Gartner Inc (see Tables 1 & 2 below).
Comparatively, worldwide IT spending is set to shrink to US$3.66 trillion in 2015, a 1.3% decrease from 2014 (see Table 3), Gartner said in a statement.
The market research and analyst firm said that the rising dollar is chiefly responsible for the slowdown.
“We forecast US-dollar-valued worldwide IT spending in 2015 to shrink by 1.3%, down from the 2.4% growth forecast in last quarter’s update,” said John-David Lovelock (pic), research vice president at Gartner.
“However, this is not a crash, even if it looks like one. The recent rapid rise in the value of the US dollar against most currencies has put a currency shock into the global IT market.
“Taking out the impact of exchange rate movements, the corresponding constant-currency growth figure is 3.1%, only off 0.6% from last quarter’s update. Such are the illusions that large swings in the value of the dollar versus other currencies can create,” he added.
However, this illusion masks a bigger issue that has real implications, according to Lovelock.
“Every product or service that has a US dollar-based component must have those costs covered at the lower exchange rate. The simple implication is that there will be price rises.
“However, there are many other market forces at work – protecting US dollar profits will require a nuanced and multifaceted approach involving pricing, partners, and product management,” he said.
The US dollar spending on devices (including PCs, ultramobiles, mobile phones, tablets and printers) for 2015 is forecast to decline 1.2% to US$685 billion.
Spending for all devices in 2015 was revised down partly due to a slowdown in PC purchases in Western Europe, Russia and Japan, countries where local currency has devalued against the dollar, Gartner said.
The mobile phone market is not as affected by the currency shifts. Substantial change in the phone mix in emerging markets toward lower-priced smartphones negates price increases of premium phones, resulting in flat phone average selling prices between 2014 and 2015.
Data centre system spending is projected to reach US$142 billion in 2015, an increase of just 0.4% from 2014.
External controller-based storage, enterprise network equipment and servers have all been impacted by the depreciation of some local currencies against the US dollar, but the server segment has seen the biggest impact due to the greater pricing pressure that server vendors are exposed to, due to their relatively lower margins.
Spending in the enterprise software market is on pace to total US$320 billion in 2015, a 2.3% increase from 2014, Gartner said.
Nevertheless, this is a downward revision from the last forecast and is the result of a substantial reduction in the forecast for office suite spending, reflecting the acceleration of Office 365 adoption.
Office 365 is disrupting traditional revenue flows. Its cost is prorated over the life of the subscription, resulting in significantly lower revenue growth as users transition away from the on-premises model.
IT services spending will contract slightly to US$942 billion in 2015, down from US$948 billion in 2014. The largest reductions were made in implementation services, particularly in the United States.
Although the oil and gas industry is only 1% of the IT services market, oil and gas buyers historically react quickly when their prices drop, often cutting back on spending 20% or more.
Because the United States is a large oil producer and a large market for IT services, the largest spending reductions on services is expected to take place in the United States through 2015 and 2016, with an early impact on implementation services.
Growth in spending on telecom services is predicted to shrink by 2.6% in 2015, to total US$1.57 trillion.
Among the more prominent changes affecting multiple regions were reductions in total connections for developed markets such as the United States and several Western European nations, as growth in data-only connected devices and multi-SIM connections were not as high as previously expected.
Asia Pacific IT spending to grow 8.2%; above global growth of 4.1%
Malaysia’s IT spending to grow 10% in 2014, outpacing APAC: Gartner
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