IT Spending Higher Than Expected In 2012, And Will Accelerate In Years Ahead

April 1, 2013 Timothy Prickett Morgan

The prognosticators at Gartner have got out the soft cloth and polished up their crystal balls to gaze into the next two years of IT spending. And they have also rejiggered how much they think the companies of the world blew on IT and telecom hardware, software, and services now that earnings season for the fourth quarter financial results are over.

At the beginning of the year, as we previously reported, Gartner figured that aggregate IT spending globally would come in at $3,588 billion, up 1.2 percent compared to 2011. (We’ll speak in terms of billions because rounding up to trillions and two significant digits masks the idea that tiny changes still can end up being tens of billions of dollars.) Now, says Gartner, after seeing the numbers from the IT and telecommunications players, the market researcher reckons that there was something more on the order of $3,618 billion in spending in the IT sector worldwide last year, an increase of 2.1 percent.

That’s not necessarily a cause for raucous celebration, but it is moving in the right direction. Spending on data center systems–servers, storage, and switches–was unchanged in the latest set of numbers at $141 billion, and enterprise software was largely unchanged at $279 billion (it was up $1 billion). The big change in the 2012 numbers was for devices–PCs, tablets, smartphones, and printers intended for business. Gartner now thinks these items added up to $665 billion, up from the $627 billion it thought would be spent on devices when it did its first pass on 2012 estimates back in January. PCs went flat for the year, printers were down, but people were buying beefier smartphones.

“Although the United States did avoid the fiscal cliff, the subsequent sequestration, compounded by the rise of Cyprus’ debt burden, seems to have netted out any benefit, and the fragile business and consumer sentiment throughout much of the world continues,” said Richard Gordon, who is managing vice president at Gartner in charge of predicting the immediate past and future, in a statement accompanying the figures above. “However, the new shocks are expected to be short-lived, and while they may cause some pauses in discretionary spending along the way, strategic IT initiatives will continue.”

Looking ahead, Gartner is projecting that global IT spending will rise by 4.1 percent this year, to $3,766 billion, with growth across all of the five key categories that the company lumps spending into. Companies, like people, hate the phone bill, which comprises just under half of the total IT budget for planet Earth and has for quite some time. The interesting bit is that spending on data center iron is expected to accelerate this year, almost tracking with the market at large. That growth rate is down a bit from the earlier forecast of 4.5 percent for 2013, and Gartner says that spending on external storage is under pressure as is IT spending in general in the EMEA region, which has several countries in recession and a whole lot more trying very hard to stay out of it. The growth rate for device spending is expected to slow this year, as you can see in the table above, and is forecast continue to slow further into 2014. But the numbers are still so huge that by 2014 spending on devices will be five times as large as on the big data center gear that makes them useful.

Budgets for enterprise software are accelerating, with spending on database and data management tools on the rise and more than compensating for falling operating system and system management revenues. Supply chain management software will be another growth area over the next few years, says Gartner.

On the services front, Gartner says it is a buyer’s market since all customers are being more cautious about making commitments, making for a hyper-competitive environment. This may sound like a great thing for customers at first blush, but if IT vendors are under pressure to win more services deals and cut costs at the same time, this could be a real recipe for disappointment on behalf of customers if it gets too far out of hand.