Framingham, MA – August 5, 2014 – According to the new International Data Corporation (IDC) Worldwide Black Book (Document # 250222) just released, a period of volatility is gradually giving way to a more positive outlook for IT spending in the second half of 2014. With the US and other mature economies mostly heading in the right direction, and a significant commercial PC refresh already underway, improvements in business confidence are set to drive a moderate infrastructure upgrade cycle over the next 12-18 months, while investments in software and services will continue to accelerate.
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Worldwide IT spending is now forecast to increase by 4.5% in 2014 at constant currency, or 4.1% in US dollars. A significant proportion of this growth is still being driven by smartphones – IT spending excluding mobile phones will increase by just 3.1% this year in constant currency (2.8% in US dollars). Aside from smartphones, the strongest growth will come from software including rapidly expanding markets such as data analytics, data management and collaborative applications including enterprise social networks. The 3rd platform pillars of Big Data, Social, Mobile and Cloud will continue to drive virtually all of the growth in IT spending, while 2nd platform spending will remain effectively flat.
Meanwhile, although some emerging markets remain constrained by macroeconomic and geopolitical wild cards, there is now significant pent-up demand for IT investment that will drive stronger growth next year in markets including India, Brazil and Russia. Pent-up demand has already driven a significant rebound in both consumer and enterprise IT spending in China this year, as confidence stabilizes. While mature economies are still driving the upside in 2014, emerging markets will once again dominate in 2015.
Cold Snap and Wild Cards Impacted IT Spending, But Underlying Demand is Strong
Some IT market segments performed weaker than expected in Q1, in line with the weather-related slowdown in US output and the impact of wild card events including the conflict in Ukraine. In particular, an overdue enterprise infrastructure refresh cycle was disrupted by short-term declines in business confidence. However, strong underlying demand for this investment cycle, will drive improvements in the server, storage and network infrastructure markets in the coming months.
"At the beginning of 2014, we asserted that businesses would choose to fix the roof while the sun was shining," said Stephen Minton, Vice President in IDC’s Global Technology & Industry Research Organization (GTIRO). "Unfortunately, the weather was literally much colder than expected during Q1. The good news is that the US economic outlook has already brightened, and this will drive a period of moderate but long-awaited investment in mission-critical infrastructure over the next year. However, accelerating adoption of Cloud services will continue to impact sales of traditional on premise equipment, packaged software and IT services. This capital spending cycle will be mild by historical standards."
PC Refresh Stronger than Expected in Mature Economies, Tablet Shipments Weaker
The commercial PC refresh has proven stronger than originally forecast. As a result, IDC now forecasts PC spending will increase by 3.5% in 2014 (the fastest pace since the post-financial crisis rebound of 2010). Western Europe has also seen an improvement in PC shipments, although PC spending in Europe will still be down by 1% due to average price declines. The PC cycle has already driven a market upturn in Japan, where economic growth and upcoming tax increases drove a surge in capital spending in 2013 (PC spending in Japan increased by 6% last year, but will decline by 4.5% this year).
"The end of support for Windows XP is obviously part of the story, but there has also been a transition of some spending from tablets to PCs as consumers and businesses have allocated disposable income and IT budget to replacing older notebooks and desktops rather than upgrading their relatively new tablets,” said Stephen. “The tablet market is also more sensitive to economic wild cards and price competition, now that penetration rates have increased. There’s still plenty of growth ahead for tablets, however, and it would be premature to say that improvements in the consumer PC market represent anything like a reversal of the long-term shift to tablets and hybrids over the long term."
The US tablet market is now forecast to increase by just 2% this year, but will rebound to 7% growth in 2015 as the PC cycle begins to wane. Worldwide tablet spending has slowed from 29% last year to 8% in 2014, but will accelerate back to double-digit growth next year (10%). Penetration rates in emerging markets such as China will continue to increase, while some enterprise spending will shift back to tablets.
Pent-Up Demand and Mobile Driving Growth in China, With Other Emerging Markets to Follow
The economic slowdown in 2013 had a negative impact on IT spending in China, but this also created a significant swell of pent-up demand that is now driving improvements in technology investment. IT spending growth in China decelerated to 8% last year but is on course for 13% growth in constant currency in 2014.
According to Stephen, “Smartphones are a large factor in overall growth, as Chinese manufacturers have successfully expanded the customer base with new, price-competitive products that have driven overall volume. But while smartphones are a big part of the story, there has also been a significant upturn in business spending on infrastructure and software.”
Excluding mobile phones, IT spending in China will increase by 5% this year (up from growth of just 2%, excluding phones, in 2013). Server spending in China will increase by 7% (compared to 0% in 2013), storage spending by 8% (up from 1.5% in 2013), and software by 9% (up from 7% last year), but overall market growth is still weighed down by the declining PC market.
Other emerging markets are likely to improve over the next 12 months as business confidence stabilizes. IT spending in India will increase by 15% next year, up from 8% in 2014. In Brazil, the market will accelerate from 10% growth this year to 13% next year. In Russia, where the crisis in Ukraine has caused such damage to business and investor confidence since the beginning of the year, the market is set to decline slightly in 2014 before rebounding to 7% growth in 2015.
Mature economies have remained more stable since last year, with market growth often outpacing expectations. The US IT market will increase by 4% this year, and Western Europe will maintain a 2% growth rate overall. Overall Worldwide IT spending will reach almost $2.1 trillion in 2014. Including Telecom Services, the Worldwide ICT market will increase by 4% to $3.7 trillion, with Telecom Services growth of 4% driven by mobile data services and increasing broadband penetration.
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 analyses 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.
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