Cheap tablets, cloud options and hyperscale costs see IT spending growth cut to $3.75tr this year

The move to lower cost devices, hosted services and hyperscale computing is dampening worldwide IT spending growth.
Written by Liam Tung, Contributing Writer

Analyst firm Gartner has cut its forecast for IT spending growth this year from 3.2 percent to 2.1 percent on the back of smaller than expected growth in devices, datacentre systems, and IT services.

Gartner may have been a little too bullish in its earlier forecast that 2014, fuelled by datacentre and software spending, would be a $3.8tr year for IT vendors. The analyst firm today cut its 3.2 percent growth prediction for the year, made in April, to 2.1 percent. It's now predicting investment of $3.75tr in 2014 across devices, datacentres, IT services, enterprise software, and telecom services.

Spending on devices, which includes PCs, mobile phones, tablets and printers, is now forecast to be 1.2 percent more than it was in 2013, totalling $685bn — down from the 4.4 percent growth predicted in April. The main reasons for the lower forecast are falling prices for mobile phones and tablets and an expected decline in high-end tablet sales. The US is now approaching 50 percent penetration for tablets, with those buying slates for the first time tending to opt for cheaper models. Gartner is however predicting spending on devices will pick up in 2015, forecasting 5.8 percent growth for the year.

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Image: Gartner

Datacentre system spending is expected to only grow 0.4 percent this year to $140bn, compared with the 2.3 percent growth it predicted in April. The cut is largely due to the shift in the enterprise towards cheaper alternatives to servers and external controller-based storage, such as cloud storage options. The so-called hyperscale segment of hardware, consumed by the likes of Google, Amazon and Facebook, is one bright spot in the datacentre outlook, but as Gartner notes, buyers are typically favouring very low-cost platforms.

IT services is expected to grow 3.8 percent year on year to $967bn. However, the category is growing slower than expected due to continuous price cuts by big players in cloud storage market. Google, AWS, and Microsoft have lowered the cost of their cloud storage prices dozens of times over the past year. As such, Gartner notes that public cloud services are proving "increasingly cannibalistic" of traditional datacentre outsourcing services.

Meanwhile, the enterprise software market is on pace to reach $321bn in 2014, marking a 6.9 percent increase on 2013 revenues. A highlight in this category is database management software, which is expected to grow on the back of big data and digitisation initiatives. Meanwhile, slow PC sales and cloud apps are expected to negatively impact the applications market, in particular office suites and digital content creation packages.

Telecom services will grow 0.7 percent in 2014 to $1.6bn. The segment's voice average revenue per user is expected to decline 10 percent annually through to 2018 due to declines in prepaid users.

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