OS demand is drooping - so why can't businesses stop spending on software?

Enterprise software may enjoy the biggest growth in any area of IT spending, but serious changes are going on under the surface.
Written by Toby Wolpe, Contributor

While spending on enterprise software is expected to maintain healthy growth in the next couple of years, the traditional operating system is taking a tumble.

Gartner research released today shows that enterprise software will be the sector of IT spending with the highest growth between 2013 and  2014 at 6.7 percent. The figure represents a slight increase on 2013's figure of 6.4 percent — when software's growth is only topped by that of devices.

However, that growth won't be mirrored in operating systems, where the inexorable rise of smartphones and tablets is causing a fall in demand for traditional desktop OSes.

In 2010, half of spending on devices went on PCs and laptops, and a quarter on smartphones. However, according to Gartner, that pattern will be roughly reversed by 2017: smartphones and tablets will account for half of device spending while the traditional desktop PC and notebook share will fall to 20 percent.

Growth in spending for operating systems has declined from six percent between 2010 and 2011 to a negative figure of -0.03 percent in 2011-12 and is expected to stand at 3.5 percent for 2013-14.

Change in user tastes and the BYOD trend

Gartner managing vice president Richard Gordon said the sharp slowdown in corporate demand for traditional PCs is bound up with a change in user preferences and the BYOD trend.

"What you're seeing in enterprises is some of that dynamic. It's not the case that everybody walks into their company and gets a PC anymore," Gordon said.

"You're seeing a slowdown in refresh rates for the more traditional device types. And when you look at enterprise software, the slowdown in operating system growth is probably a result of that trend."

Worldwide enterprise software spending is forecast to hit $297bn this year, the analyst said.

The fall in demand for operating systems and operations management software is being offset by stronger growth in databases, data integration and supply-chain software.

"There's a real need for companies to invest in software for things like business analytics, business intelligence and database software to deal with the influx of a huge amount of complex data. That's where the spending is shifting to," Gordon said.

Telecoms services leads in spending

In terms of overall spending levels, telecoms services leads the field by some margin, with revenues expected to reach $1,728bn by 2014. IT services comes next with $963bn, devices on $758bn, enterprise software on $316bn and datacentre systems on $152bn.

Global IT spending is due to reach $3.8tr by the end of this year, according to Gartner.

"If you look at the overall IT spend growth figures they are fairly modest — three or four percent," Gordon said.

"But with the uncertainty over the economic situation and the politicians' ability to make sensible decisions, that fact we've got IT spending holding up at that level is quite encouraging," he said.

Gordon argued that there is no further degradation in IT spending growth. "You might have expected potentially to have lower growth figures — zero percent or even negative — but we're not seeing that," he said.

"I think what it says is that we're still seeing — obviously the keep-the-lights-on-spending is continuing — the strategic investments going even though the economic situation is unstable and uncertain. We're seeing some positive growth, which is encouraging and we can take some optimism from that."

Gartner first quarter 2013 IT spending projections
Gartner's 2013 projections show telecoms and IT services still account for the lion's share of IT spending.
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