IT Spending Projections Revised A Smidgen Upward

April 7, 2014 Timothy Prickett Morgan

The prognosticators at Gartner keep a constant eye on the state of the global economy and revenues each quarter at all of the publicly traded IT suppliers. So they are constantly adjusting their projections for IT spending, and last week, the company did it again. Luckily for all of us, the news is thumbs up instead of thumbs down.

According to the IT spending models developed under the guidance of Richard Gordon, managing vice president at the company, global IT spending as measured in U.S. dollars will rise by 3.2 percent to $3.771 trillion. This is a tad bit higher than the 3.1 percent growth the company was projecting back in January during its last forecast, but you have to be careful with these numbers. Back then, Gartner figured IT spending would come to $3.663 trillion, with 3.2 percent growth to $3.777 trillion. This time around, a little more than three months later, Gartner now figures that companies only spent $3.654 trillion on IT stuff, so $9 billion in revenues have evaporated in 2013. And for the 2014 figures, the number has dropped down to $3.771 trillion, which is another $6 billion gone.

These may be a rounding errors in the numbers, but that is a lot of money for any one company or group of companies, and the ups and downs, caused as much by currency exchange rates as real sales or the lack thereof, affect real lives nonetheless. These downward wiggles are people losing their jobs, provided these estimates reflect reality. All that said, the good news is that there is growth between 2013 and 2014.

“Globally, businesses are shaking off their malaise and returning to spending on IT to support the growth of their business,” said Gordon in a statement accompanying the figures. “Consumers will be purchasing many new devices in 2014; however, there is a greater substitution toward lower cost and more basic devices than we have seen in prior years.”

Here’s how the spending all stacks up, and how much it will grow in each category:

The relentless pace of Moore’s Law, which has diminished sales of gear inside the datacenter (at least if you assume demand would have been constant) is now affecting the market for smartphones as it has for PCs and servers. Gartner says that consumers are starting to prefer midrange smartphones in developed countries and low-end Android machines in emerging markets, and this is cutting back on revenues in this portion of the devices sector. That said, with sales of PCs stabilizing, overall device sales are expected to rise this year by 4.4 percent, which is a 5.8 point swing compared to last year.

Data center system sales, which includes servers, storage, switches, routers, and other gear, will account for $143 billion in revenues if Gartner’s forecast turns out to be true, a modest 2.3 percent rise. Networks are being driven by cloud computing, which has a lot of traffic between servers as well as traffic out to end users and down to storage devices, as well as the sheer number of mobile devices that we all have and feel entitled to use any time we feel like it. Not surprisingly, Ethernet switches and wireless access points are expected to show good growth this year. So is database management software, which for the first time will add up to more revenues that for operating systems. That is as weird as storage revenues exceeding server revenues–something that definitely has not happened and probably will not for many years to come.

On the services front, the 4.6 percent growth will be driven by a shift to project implementation and away from project consulting and planning.

Telecom spending still makes up nearly half of the global IT spending, the way Garner reckons it, and that is only projected to grow by 1.3 percent. If you take that out of the mix as well as spending on devices, you get a kind of core datacenter IT spending amount. And, if you do the math, as I did, then that comes to $1.427 trillion in systems, software, and services, and this market is growing at 4.9 percent, which is faster than the overall IT market at large.