Tough times ahead for IT budgets as strong dollar hits spending plans

Struggling IT sector faces 3.5 percent fall in spending as vertical industries - especially government and manufacturing - dip into negative territory this year.
Written by Colin Barker, Contributor
Source: Gartner (September 2015)
If last year the IT sector was encouraged by signs of growth - albeit single-figure growth - such growth has ended for now, according to the latest figures from analyst Gartner.

Worldwide IT spending across vertical industries is forecast to total $2.69 trillion in 2015, a 3.5 per cent decrease from 2014. Gartner attributes the slowdown chiefly to the rising US dollar.

The decline is led by two sectors: governments, which will spend 5 percent less on IT this year than last; and manufacturing and natural resources, which will see a 4.5 percent drop. The decline across all the other sectors - as defined by Gartner - is predicted to be between 1.5 and 3.9 percent.

"Appreciation of the US dollar - mainly against the euro, yen and the ruble - along with the relative slowdown of emerging markets like Russia, Brazil and China, had a double impact on IT spending in 2015, and explains the downward revision in the forecast," said Gartner research vice president, Anurag Gupta. "Unsurprisingly, most technology firms reporting revenue in US dollars have taken a negative hit on their quarterly revenue earnings."

This compares with a year-on-year increase in IT spending in 2014, although the rise was modest -- between 0.69 and 2.7 percent. Government was again the standout last year, as it was the only sector to post a decline, of 1.2 percent.

Gartner says these figures, while disappointing, are not unexpected - and sees grounds for optimism going forward.

While IT spending in the retail sector is forecast to decline 1.5 per cent in 2015, for instance, Gartner believes that the technologies they're investing in could bring benefits to businesses. Technologies that help retail organisations "understand customers better, improve engagement through multichannel experience and facilitate the buying process are high-priority areas," it said.

Within retail shops, creating IT infrastructure to accept various mobile payment systems and digital wallets will also be high-priority items in the second half of 2015, Gartner believes.

This year retailers will be busy investing in new point of sale (POS) terminals, Gartner says, "as merchants in many countries comply with the October 2015 deadline to convert to new systems, whereby, the liability will shift from credit card issuer (such as Europay, MasterCard and Visa]), to merchants for accepting nonchip, PIN-based cards".

IT spending in banking and securities segments, two areas previously considered immune to these periodic issues, is forecast to decline 2.4 per cent in 2015. But the declines may not last for long, Gartner says. It predicts banks in developed markets will double their IT budgets to support digital and other new technology initiatives through 2019, while reducing legacy maintenance, to sell products, service customers, and reduce operational costs.

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