IT Spending Projections Crimped For 2012

April 23, 2012 Timothy Prickett Morgan

The strengthening U.S. dollar and slightly higher spending last year on hardware, software, and services as well as a reduction in projected spending by companies have combined to make Gartner revise its IT spending expectations for 2012 downward a bit.

Here’s the deal. Gartner reckons that IT spending was a little bit stronger in 2011 than its projections earlier this year pegged it, with sales of $3,661 billion worldwide across all categories of IT spending, including computing hardware, enterprise software, IT services, telecom hardware, and telecom services. In January, just after 2011 had ended but before many of the IT giants had reported its financials, Gartner said worldwide IT spending would be around $3,644 billion. So that’s an extra $17 billion, and that makes for a tougher compare now for whatever projections Gartner had for 2012.

On top of this, says Gartner, the greenback is getting stronger against other currencies. If you look at IT spending in local currencies and convert it to the prevailing dollar-local currency ratio at the end of 2011, then worldwide constant dollar spending on all stuff IT would rise this year by 5.2 percent, instead of the 4.2 percent that the economists at Gartner had been predicting in January. Such a comparison tells you how well everything is in local economies, but the biggest IT players are located in the United States, and they have to bring that money back here as dollars to count it and pay taxes. And when the dollar gets stronger, it means less of a revenue bump.

Finally, Gartner now says that companies will be spending a little bit less on IT stuff, particularly services.

Add all of these effects up, and IT spending growth is pegged at 2.5 percent for 2012 instead of 3.7 percent from the January projection. That’s a lot cooler growth than the 6.8 percent seen in 2011, obviously, and while there is not a direct link between global IT spending and our own pay rates here as employees in the IT ecosystem, there is some correlation going on, generally speaking.

Spending on computer hardware is now expected by Gartner to rise by 4.3 percent, to $421 billion, and enterprise software will grow even more, up 5 percent to $280 billion. IT services is cooling, with only 1.3 percent growth, to $856 billion. (Look at the ratio of hardware, software, and services. Do you think hardware is the problem, or services? I know what my answer is. . . . ) Telecom equipment spending will hot $472 billion in 2012, up 6.9 percent, if Gartner is right, but we are all going to try to cut back on the data and voice bills, with telecom services spending only rising 1 percent, to a whopping $1,721 billion.