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Gartner: IT Spending Will Decline In 2016

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Gartner expects global IT spending to dip slightly in 2016, to $3.49 trillion. Faced with spending constraints, but the need to advance, many are optimizing by spending on services instead of assets.

Worldwide IT spending is expected to total $3.49 trillion in 2016, down 0.5% from last year, Gartner reported April 7, noting that this was down from its last-quarter forecast of a 0.5% increase.

The change, according to Gartner, is due to fluctuations in currency, but also a balancing act between fiscal caution and the need to invest in digital business areas.

“There is an undercurrent of economic uncertainty that is driving organizations to tighten their belts, and IT spending is one of the casualties,” John-David Lovelock, a Gartner research vice president, wrote in a statement.

“Business leaders know that they need to became digital businesses or face irrelevance in a digital world,” Lovelock continued. “To make that happen, leaders are engaging in tough cost optimization efforts in some areas to fund digital business in others.”

For example, Lovelock wrote, some companies are taking what they’re saving from optimizing legacy systems and using it to invest in digital initiatives. While fewer than 10% of organizations, typically, are in a cost-cutting or cost-optimization mode, Lovelock notes, the need to spend on new initiatives during a time when revenue growth doesn’t support such an idea, “is forcing more organizations to optimize as a first step.”

Such optimization often takes the form of turning to what Gartner calls a “service twin” — VoLTE instead of cellular, cloud software instead of service software. In short, companies are redirecting their spending from assets to services.

Gartner expects spending in the IT services market to return to growth this year, and reach $929 billion, up 2.1% from 2015.

Telecom service spending is expected to decline by 2%, to $1.4 trillion, although mobile data spending will be an area of exception, encouraged by improved pricing on bandwidth, mobile apps, and 4G/LTE network availability.

Spending on data center systems is also expected to grow, topping 2015 spending by 2.1%, for a total of $175 billion. Enterprise network equipment purchasing, which performed better than expected in 2015, will again be a bright spot, according to the firm.

The device market, however — which includes smartphones, tablets, PCs, printers, and ultramobiles — is headed for a decline of 3.7% below 2015 spending.

“The smartphone market is approaching global saturation, slowing growth,” according to Gartner. Declines in PC and ultramobile spending will be geographically specific, it added, with economic conditions amplifying other factors.

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