IT Spending Expected to Accelerate Next Year, After Emerging Markets Slowdown in 2013
06 Nov 2013
Framingham, MA – November 6, 2013 – According to the new International Data Corporation (IDC) Worldwide Black Book (Doc #244215) just released, worldwide IT spending is expected to accelerate next year after dipping to its slowest pace of growth since the financial crisis in 2013. Overall tech spending is on course to increase by 4% this year at constant currency, reaching $2.04 trillion, down from last year’s growth of 5% due mainly to the slowdown in key emerging markets including China and Russia. IDC forecasts that in 2014, a rebound in China and continued momentum in the US and Europe will see a return to overall industry growth of more than 5% (reaching $2.14 trillion).
Smartphones Still Driving Growth, but Infrastructure Set for Recovery
In fact, almost half of this year’s industry growth is due to continued strength in smartphone and tablet shipments. Excluding mobile phones, IT spending will increase by only 2.6% this year at constant currency (just 0.7% in US dollar terms, based on year-to-date exchange rates). Enterprise IT spending in many regions has been tepid since last year, with weaker spending on PCs, servers and storage than previously expected. Tentative signs of stability in commercial PC shipments during Q3, however, may foreshadow the gradual recovery in enterprise infrastructure investment which we expect to unfold in the next 12-18 months as a broad-based capital spending cycle kicks into gear. Spending on servers, storage and enterprise networks will increase by just 1% in 2013 before accelerating to growth of 4% next year.
Chart 1: Worldwide IT Spending Growth (% constant currency)
“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 (GTIRO). “The overall industry has been propped up by continued strength in mobile devices, especially smartphones, but the slowdown in emerging markets was another headwind for infrastructure-focused tech firms on top of government sequestration in the US and continued sluggish growth in Europe.”
US Market Is Resilient, Despite Politics
While the US is on course to post IT spending growth of 5% this year, this translates into just 3% excluding mobile phones. Enterprise spending in the US has been relatively resilient, given the ongoing political volatility, but spending on PCs and servers will decline this year while storage investment is flat. Both the storage and server markets in the US are expected to improve in 2014, but PC spending is likely to remain weak in spite of signs of stability in Q3 as tablet cannibalization continues at lower price points.
“The US market has held up pretty well, all things considered,” said Minton. “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.”
Europe and Japan Have Stabilized
Market conditions are gradually improving in Western Europe, where overall IT spending is on course for growth of 2% this year (1% excluding phones), and where economic momentum has taken a turn for the better in many countries. We assume that this gradual recovery will continue next year, translating into IT spending growth of 3% driven mainly by strengthening sales of commercial software. This year has also seen a moderate improvement in Japan, driven by the government’s short-term policy initiatives; while IT spending is on course to be flat in 2013 (0% growth), this marks an improvement from our previous forecast of a 1% decline.
“Momentum in developed economies has been broadly positive since the start of 2013,” said Minton. “The gradual turnaround in Europe is restoring business confidence, leading to a strengthening of our assumption that next year will be better than this year for most IT vendors. In Japan, some sectors have performed stronger than previously expected. But while the news from developed economies has been mostly positive since January, the drag on overall industry growth this year has been the slowdown in emerging markets.”
China Will Rebound in 2014
IDC forecasts that IT demand will accelerate in China next year, in line with our expectation that macroeconomic growth and business confidence will improve. In China, overall IT spending is on course to increase by just 8% this year, the weakest pace of growth since 2008; next year, we forecast an acceleration of growth to 14% led by strengthening sales of PCs, servers, storage, software and IT services. Growth in India will remain broadly strong, driven mainly by smartphones and tablets, but we expect a slowdown in PC sales after state-level government initiatives helped to drive strong growth in 2013, while there are also signs of weakening growth in other sectors. A gradual deceleration in tech spending is also emerging in Brazil, while in Russia the economic slowdown has driven overall industry growth to just 1% this year (from 15% in 2012). We forecast a rebound in Russia to 10% growth next year, driven by smartphones, software and services.
“In recent years, growth in emerging markets has been a ‘pot of gold’ for many global IT suppliers, as they capitalized on huge opportunities to expand into new territories even while growth in developed economies was anemic,” said Minton. “This year has been a different story, with some organizations stung by the large bets they placed on a continuation of those growth trends. It’s important to remember that growth in emerging markets will continue to outpace the US, Europe and Japan, in spite of these bumps in the road, and that any retreat from those geographies will only be to the benefit of emerging competitors from China and elsewhere with global ambitions of their own.”
IDC's Worldwide Black Book provides forecasts for IT spending in 54 countries around the world. IT spending forecasts focus on 25 individual market segments across hardware, software, IT services, and telecom services for individual countries in all regions including North America, Latin America, Western Europe, Eastern Europe, Asia/Pacific, the Middle East, and Africa. The Worldwide Black Book Query Tool presents all data in the following exchange rate views: U.S. dollars in constant currency, annual and year-to-date exchange rates, and local currency.
Additional products in this category include the Worldwide Enterprise Black Book, which analyzes annual IT spending in relation to four company size segments based on employee counts. The Worldwide Black Book, Premium Edition, includes cloud spending forecasts, quarterly IT spending forecasts by region, IT vendor market share analysis, macroeconomic indicators, IT/Internet penetration, and CIO survey data. The United States Black Book: State IT Spending by Vertical Market is a quarterly analysis of the status and projected growth of the IT industry in 50 states and across 15 vertical markets.
On Thursday, November 7, 2013 IDC will be presenting its new Black Book forecasts in a special webcast: “State of the Market”. Details and registration information can be found by clicking on the link.
For additional information about this research, or to arrange a one-on-one briefing with Stephen Minton, please contact Sarah Murray at 781-378-2674 or email@example.com. Reports are available to qualified members of the media. For information on purchasing reports, contact firstname.lastname@example.org; reporters should email email@example.com.
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For more than 49 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. For more information, please visit www.idc.com, email firstname.lastname@example.org, or call 508-872-8200. Visit the IDC Insights Community at https://idc-insights-community.com.
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