Mobile collapse and emerging markets cause cut in IT spending growth

Mobile collapse and emerging markets cause cut in IT spending growth

Summary: Worse than expected tablet sales prompt analysts to revise spending forecasts again.

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Analyst firm IDC has cut its prediction for how much worldwide IT spending will grow this year from 4.6 percent to 4.1 percent, citing a slowdown in investments in mobile devices and uncertain macroeconomic conditions in emerging markets.

It's the second cut IDC has made to its IT spending forecast for the year, which now puts the outlook for 2014's growth below last year's figure of 4.5 percent.

The main reason behind the cut is a slowdown in the sales of mobile devices, including weaker than expected demand for tablets. In the first quarter of this year, US tablet sales fell 40 percent year on year as a result of a sharp decline in iPad sales. In addition, exchange rates are looking unfavourable for US-based IT vendors, according to IDC.

One bright spot in IT spending however is that an uptick in infrastructure investment, excluding mobile, will slightly accelerate spending growth from last year's 2.9 percent to 3.1 percent in 2014.

"This volatility, coupled with the macroeconomic uncertainty in many emerging markets, is somewhat masking a more positive underlying foundation for enterprise IT spending, with firms continuing to invest in working off that pent-up demand to replace old servers, storage and network gear," said Stephen Minton, vice president in IDC's Global Technology & Industry Research Organisation.

"Some of that spending is also driving IT services, despite the fact that an increasing number of businesses are moving more of their traditional IT budget to the cloud," he added.

IDC expects 10 percent of software spending to be on cloud services by the end of 2014, while infrastructure-as-a-service should soak up 15 percent of spend on servers and storage.

The slowdown in mobile is also not all bad news in enterprise IT, according to IDC, which sees past growth in mobile generating more data, in turn raising demand for server and storage capacity.

With Europe's economy on the mend, IDC expects spending on IT in Western Europe to grow by two percent this year — on a par with growth in the US.

"Over the past year, most of the surprises on the upside have come from mature markets," said Minton. "Japan had a strong year in 2013, and a similar pattern is expected this year in North America and Western Europe. We still expect that businesses will choose to fix the roof while the sun is shining in the second half of 2014, as part of a general infrastructure investment cycle."

Meanwhile, Russia and China are still IT spending "wild cards" for the year. IDC expects growth in China to reach 10 percent in 2014, before slowing down in 2015. Meanwhile, Russia's spending is forecast to decline by one percent this year.

Earlier this year, fellow analyst firm Gartner forecast IT spending in US dollar terms to grow 3.1 percent in 2014, totalling $3.8tr.

Topics: Servers, Cloud, Smartphones, Tablets

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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3 comments
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  • "...sharp decline in iPad sales"?

    In the most recent Apple earnings call, Tim cook explained that the "decline" was just numerical, and could mislead you if you didn't understand that there was an excess of full-size iPads in channel inventory in the year-ago quarter, being more reasonable this quarter, and that iPad minis were backlogged (fulfilled in the second quarter). Taken in perspective, any decline was not dramatic. Studies have also shown that people hang on to a given tablet version longer than they will a phone version, and only upgrade when a new tablet offering has substantial advantages: people are regarding tablets more like personal computers than mobile devices when it comes to upgrade cycles.
    Quidproquorum
  • Collapse?

    A slowdown in sales of a maturing market is by no stretch of the imagination a collapse. Nothing more than click bait. Hate these types of writers.
    Huckleseed
  • Tablets and Smartphones in maturing market?

    Due to the fact that the vast majority of people who want those devices already have something. Whether that something seems adequate to the buyer is the sticking point. I have 3 to 4 year old W7 computers, and a year to year and a half old tablets. I am not in any rush to buy new ones. No matter how slick a new device looks to me, if I don't see a need for it, then I will just sit on my hands and enjoy what I have. People may spend more time trying to decide what will actually fulfill their needs. I think that lots of people who buy Apple products are not cash strapped and buy more on impulse than an Android buyer who may scrutinize what products are available. Apple products tend to cost more than Android products so that people who are more economically challenged may opt for the less expensive Android product. Lets face it, new cars can be $20,000 to $50,000 so that is actually a vast multi-year expenditure, but even top of the line Android and Apple phones are in the $700 to $800 range and a lot of people don't see them as multi-year expenditures. Phones and Tablets can be bought on impulse more than a car and with cell phone companies advertising that you can change your phone every year or less, that may appeal to a large contingent of the technical world. People who have large debts in the "Real World" may not be as impressed with this changing phones like they change their wardrobe. I don't supposed there is any data on it, but I suspect that a large contingent of the phone up-dater's don't have large amounts of "Real World" Debts. Also most of the phones are sold for $0 to $200 down and then paying the balance over the 2 year contract. $30 a month over 2 years is $720, so they are actually paying a lot of money for their phone, but buying it on credit makes it seem smaller. Maybe large segments of this population are Tapped Out!!!!
    rgeiken@...