Gartner Blames US Dollar For Lower IT Spending Forecast

The outlook for global IT spending continues to improve says Gartner, but the analyst firm slashed its previous growth predictions of 3.7 percent to just 2.5 percent in 2012.

However, it seems that the lower growth rate has more to do with economics – in particular the continued strengthening of the US dollar versus other currencies – than an actual drop in IT spending.

Bright Outlook

When the analysts looked at worldwide IT spending in constant US dollars, the rate is actually 5.2 percent for the year, up from a previous forecast of 4.6 percent.

“What we’re seeing this quarter, as we look forward to 2012, is a bit more stability in the global economic and IT industry environment: The eurozone crisis has abated somewhat, fears about the Chinese real estate bubble have waned and the HDD [hard-disk drive] shortage, while serious, has not caused significant disruption to hardware system spending,” Richard Gordon, research vice president at Gartner, said in an 5 April post on the analyst firm’s blog. “So, the global macroeconomic picture looks a little brighter, as reflected on Wall Street, which is feeding through to more confidence among consumer and enterprises to spend on IT products and services.”

Massive flooding last year in Thailand impacted the HDD industry, but it didn’t have the severe effect on the hardware market that some had feared. According to numbers released 3 April by market research firm IDC, HDD unit shipments worldwide fell 4.5 percent in 2011 due to the Thailand flooding as well as the earthquake and tsunami that hit Japan earlier in the year. Efforts to get the industry in those countries back on track will last through the first half of 2012, but production of HDDs and HDD components should return to pre-flood levels in the second half, according to IDC.

Government Austerity

One area that is showing weakness is government spending, according to Gartner’s Gordon. Government IT spending worldwide is expected to decline to some extent both this year and in 2013, thanks in large part to spending cuts in the eurozone and in the United States start to take hold. There has been talk of the need to reduce government spending and austerity in Europe since the sovereign debt crisis hit the Continent, but the impact on IT spending in Europe is only now being felt, Gartner said.

Gartner is expecting US government IT spending to be flat in 2012 before contracting in 2013.

Other areas should see strong growth. The small and midsize business (SMB) market – which Gartner analysts said accounts for about 25 percent of all enterprise IT spending, should hit $874 billion (£551bn) this year, and grow to $1 trillion (£630bn) by 2016. The SMB space will outperform other markets during the next few years, thanks to demand for enterprise software, the analysts said.

The global telecom equipment market will grow 6.9 percent in 2012, to $472 billion (£297bn). The continued explosion of the mobile device space will fuel a lot of the growth for telecom equipment vendors, according to Gartner. There’s also a growing demand for enterprise networking equipment, particularly in the areas of application acceleration, network security, wireless LAN and Ethernet switches, the analysts said.

Spending on computing hardware will jump 4.3 percent in 2012 over last year, to $421 billion (£265bn), while enterprise software spending will grow 5 percent, to $280 billion (£176bn). IT service spending will grow 1.3 percent, to $856 billion (£540bn).

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