IT budgets 2016: Less spending on PCs, smartphones and tablets, more on software

"Rather than owning licensed software, there a shifting towards digital services," says Gartner's John-David Lovelock
Written by Danny Palmer, Senior Writer

IT spending has dropped as a whole, but spend on software is up.

Image: iStock

Worldwide spending on IT is on the slide, according to Gartner's Worldwide IT spending forecast, but software and IT services continues to grow as more companies move their systems into the cloud.

The report suggests that worldwide IT spending for 2016 is set to amount to $3.49 trillion dollars in 2016, a figure which would represent a decline of 0.5 percent from $3.5 trillion last year. It might not sound like much but that represents a total decline in spending of almost $15bn.

Blame for the drop can at least partially be attributed to the global economy, with governments, businesses and other organisations attempting to spend less due to an uncertain economic outlook.

The main casualty of this frugality is devices, with sales of PCs, smartphones, tablets and other hardware expected to decline 3.7 percent in 2016. This decline is partially blamed on the smartphone market approaching global saturation, thus slowing growth, whilst PC sales continue to decline.

However, while there is a continued decline in devices spending, the changing nature of business technology means that spend in some sectors is on the rise, particular software, with products like cloud are increasingly in demand as businesses upgrade their infrastructure. According to Gartner, global enterprise software spending is on pace to total $321 billion.

Data center systems' spending is projected to reach $175 billion in 2016,

"As you grow into a digital business, you move from what we call Mode 1, the traditional way of doing IT, to a Mode 2 taking on IT more quickly" John-David Lovelock, research vice president at Gartner's told ZDNet.

The key difference between the two systems, he said, is a shift from asset ownership to service engagement resulting in a situation where "Rather than owning licensed software - servers, storage, networking equipment, even phones to a certain extent - there a shifting towards digital services".

This move towards software might also explain some of the reduction in IT spend, as Lovelock argued that it's "pushing money from the CIO to the business units where the specialisation is, so taking IT control of the CIOs budget and putting it to use elsewhere".

That, he said, ultimately leads to less being spent on IT, because when other areas of the business have control over their IT spend, suddenly departments aren't all clamoring for the most expensive services - they want the thing which is going to give them the best deal.

"Once its [money] outside of IT, it's more likely to spent on cloud or service offerings, rather than the assets. So instead of buying a server, I buy computing as a service, I buy only the little bit that I need rather than what I will need eventually," Lovelock said.

This attitude has also led to some companies adopting open source technology, in order to avoid spending funds on the area all together.

"It's surprising that when the CIO is spending the money, end users will demand a higher level of product. Once its their budget, they don't need all the all the bells and whistles with different products. So we're seeing a lot of open source being used," Lovelock said.


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