Worldwide IT spending is projected to grow 4.9% this year, says global research firm International Data Corporation (IDC). This is down from the previous forecast of 5.5% growth and represents a slowdown from the 5.6% growth recorded in 2012.
As a result, IT spending will reach $2.06 trillion in 2013. Including telecom services, ICT spending will increase by 4.5%, to $3.7 trillion, says the IDC. IT spending was slightly below expectations in the second half of 2012 and first quarter of 2013, the research company notes.
IDC explains that economic uncertainty surrounding the US government sequester, European debt crisis and weakening gross domestic production in China led to volatile spending patterns across most segments of the market, with many IT vendors reporting difficulty in closing deals at the end of the first quarter.
Emerging markets are still the engines of growth for global IT spending, with strong trends continuing in markets such as India and Brazil in recent months, says IDC. The weakest-performing geographies will be Western Europe and Japan, where slow economic growth is inhibiting IT spending, while the US market remains fragile in the context of political uncertainty.
The strength of the US dollar may continue to have an adverse impact on the reported revenues of US-based IT vendors, says IDC. In 2012, IT spending increased by just 2.9% in US dollars, a significant downturn from 9.5% US dollar growth in 2011. Based on average exchange rates in the first quarter, this year’s growth is on track to increase by 4.2% in US dollar terms, it says.
Shrinking PC sales
The reduction in IDC’s overall forecast for 2013 is largely driven by rapidly deteriorating PC shipments since the second half of 2012. According to the new report, IDC now expects PC spending to decline by 3% in constant currency this year, representing a third successive year of declining PC revenues.
The shift to mobile devices remains a key driver for overall tech spending growth. Excluding mobile phones and tablets, worldwide IT spending increased by only 2.8% in 2012 and is forecast to grow by just 2.6% this year, says IDC.
Worldwide spending on smartphones will increase by 17% in 2013, while tablet spending will grow by 32%.The combined growth rate for PCs and tablets, meanwhile, will remain stable in the range of 4% to 5%.
“Cannibalisation has accelerated over the past two quarters,” says Stephen Minton, VP in IDC’s Global Technology and Industry Research Organisation
“The trickle of substitution is becoming a flood, as many organisations look for ways to do more with less in the context of an uncertain economy in which CFOs are attempting to protect profitability by limiting the size of budget increases.
“Just as outsourcing got its boost from the 2001 recession, and virtualisation from the financial crisis of 2009, low-cost mobile devices and the cloud are being partly driven by the willingness of businesses to look for new ways of getting things done in return for improvements in efficiency, scalability and cost of ownership.”
IDC says that, just as tablets are cannibalising PC spending, the growth of cloud services continues to cannibalise commercial software and IT services. Software spending in the US grew slightly slower than forecast in 2012, and IDC has consequently reduced the US software forecast to 6% growth for 2013, from 7%.
IT services demand remains stable, but the pass-through from capital spending and software deployment remains tepid by historical standards. IDC now forecasts growth of 5.6% in worldwide software spending in 2013 (constant currency), and 3.8% in IT services.
Meanwhile, IDC is anticipating a decline in overall server revenues while storage infrastructure spending will cool somewhat after the major spending cycle of 2011/12. IDC now projects 2.4% growth in worldwide storage hardware revenues this year, down from 6.1% growth in 2012.
Network infrastructure investment was strong in 2012, as many carriers invested in the deployment of LTE networks, but this will also cool in 2013, it says. Service provider spending on network equipment will increase by 1.1% this year, compared to 5.8% in 2012, while enterprise network spending should remain more stable, projected to post growth of 6.8%, IDC adds.