Better Worldwide IT Spending Ahead, Predicts IDC

December 2, 2013 Jenny Thomas

In the United States, the day after Thanksgiving, dubbed Black Friday by retailers, marks the beginning of a spending frenzy as the year winds down and people begin to panic about getting ready for the holidays. It is the last chance for retailers to grab those consumer dollars and hopefully end the year with cash in the till.

The IT market has been in desperate need of a cash influx in 2013 as overall tech spending is on course to increase by 4 percent this year at constant currency, reaching $2.04 trillion, but down from last year’s growth of 5 percent due mainly to the slowdown in key emerging markets including China and Russia. While it would take nothing short of a major miracle to turn 2013 around in December, the analysts at IDC are forecasting more prosperous times ahead.

Way back in 2010, the prognosticators at Gartner bet that things would start turning around in 2014. And, it looks like they might have been on to something. The analysts at IDC have just released their latest Worldwide Black Book, which covers new and updated forecasts for information and communications technology (ICT) spending in 54 countries, where they predict worldwide IT spending will rebound in 2014, largely due to a recovery in China and continued momentum in the U.S. and across Europe. The predicted end result is a return to overall industry growth of more than 5 percent, reaching $2.14 trillion by the end of 2014.

Not a bad outlook for the new year. The hero of economic IT recovery will continue to be smartphones, but IDC analysts believe infrastructure is also set for recovery. Almost half of industry growth for 2013 is due to continued strength in smartphone and tablet shipments. That said, excluding mobile phones, IDC is predicting IT spending will increase by only 2.6 percent when the totals are all in this year at constant currency.

Smartphones continue to be the hero of worldwide IT economic recovery.
(Click graphic to enlarge.)

While enterprise IT spending in many regions has been tepid since last year, with weaker spending on PCs, servers, and storage than previously expected, IDC analysts are seeing tentative signs of stability in commercial PC shipments during Q3, which may foreshadow the gradual recovery in enterprise infrastructure investment. IDC says this capital spending cycle will kick into gear over the next 12 to 18 months, and while spending on servers, storage, and enterprise networks will show an increase of just 1 percent in 2013, the prediction is for growth of 4 percent next year.

“This has been a tough year for many IT vendors, with infrastructure spending in the first half of 2013 proving weaker than previously expected,” said Stephen Minton, vice president in IDC’s Global Technology & Industry Research Organization.

While the U.S. is expected to post IT spending growth of 5 percent this year, the total excluding mobile phones is 3 percent. Enterprise spending in the U.S. has been relatively resilient, but spending on PCs and servers will decline this year while storage investment is flat. Both the storage and server markets in the U.S. are expected to improve in 2014, but PC spending is likely to remain weak.

“The U.S. market has held up pretty well, all things considered,” Minton said. “The main headwind, aside from uncertainty over the next round of political dogfighting, is cannibalization as tablets continue to eat into PC sales and as the cloud eats into traditional IT services revenues. This cannibalization trend is seen across all geographies, and will be a constraint on IT spending even while the macroeconomic environment improves.”

Market conditions are gradually improving in Western Europe, where overall IT spending is on course for growth of 2 percent this year. IDC analysts are hopeful this gradual recovery will continue next year, translating into IT spending growth of 3 percent driven mainly by strengthening sales of commercial software.

IDC also forecasts that IT demand will accelerate in China next year, where overall IT spending is on course to increase by just 8 percent this year, the weakest pace of growth since 2008. In 2014, growth of 14 percent is expected in China, led by strengthening sales of PCs, servers, storage, software, and IT services. In Russia, the economic slowdown has driven overall industry growth to just 1 percent this year, down from 15 percent in 2012, but IDC is eyeballing 10 percent growth next year, again driven by smartphones, software, and services.

A look at IT spending growth around the world.
(Click graphic to enlarge.)

Emerging markets have been a jackpot for many global IT suppliers, where opportunities to expand into new territories abound. While these newer markets took a dip in 2013, those in the know at IDC say emerging markets will continue to outpace the U.S., Europe, and Japan, in the coming years, bringing much needed money into the IT marketplace. And if it’s adding to the overall health and growth of our ecosystem, does it really matter what part of the world it’s coming from?