​'Not a crash, even if it looks like one': IT spending will fall by $48bn this year

Decreasing oil prices and a strong US dollar are expected to have a major impact on IT spending in 2015.
Written by Liam Tung, Contributing Writer on

Analyst Gartner has cut its growth predictions for global IT spending in 2015, signalling a $48bn fall in investment compared with last year.

The US dollar's rise against most currencies is expected to have a major impact on IT spending over the coming year, according to the company.

Gartner has slashed its IT spending growth forecast to 1.3 percent for 2015, down from its earlier forecast of 2.4 percent for the year. As a result, total spending on everything from datacentres to devices is expected to reach $3.66tn, down from $3.71tn last year.

Despite the seemingly gloomy forecast, Gartner says IT spending is chugging along relatively smoothly, with the main reason for the new numbers being the US dollar's rapid ascent.

"This is not a crash, even if it looks like one," said John-David Lovelock, research vice president at Gartner. "The recent rapid rise in the value of the US dollar against most currencies has put a currency shock into the global IT market."

Removing the effect of exchange rate movements, Lovelock said IT spending growth at constant currency rates would be 3.1 percent for 2015.

IT spending in US dollars in 2015

US-dollar based spending growth on devices is expected to decline by 1.2 percent in 2015 compared with last year and reach $685bn, while spending on datacentres will grow 0.4 percent year on year to $142bn. Meanwhile enterprise software is forecast to grow 2.3 percent to $320bn while spending on IT services will fall 0.7 percent to $942bn. The largest decline in spending will be seen in telecom services, with spending down from $1.6tn last year to $1.57tn in 2015.

"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," said Lovelock.

While partly an illusion, the US dollar still will have a real impact on spending. Gartner cut its forecast for devices spending partly due to a slowdown in PC purchases in Western Europe, Russia, and Japan, where local currencies have devalued against the dollar.

It expects mobile phone market spending to remain constant overall but the premium end of the smartphone market could be affected by more consumers in emerging markets such as India and China buying cheaper smartphones, resulting in flat average selling prices between 2014 and 2015.

While enterprise software will grow to $320bn, up 2.3 percent year on year, Gartner has still cut its growth estimate due in particular to shift towards subscription-based offerings such as Office 365, where spending is reflected over the life of a subscription.

Falling oil prices are also expected to have an impact on global IT spending, largely due to US - a large oil producer and a significant market for IT services.

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