Monday, July 20, 2015

Tech Spending is Shrinking

Tech Spending
Steve Ranger of ZDNet reported that worldwide spending on technology will reach only US$ 3.5 trillion in 2015, a 5.5 percent decline from 2014, when it stood at US$ 3.7 trillion. he based his report on the latest forecast by analyst group Gartner.

To put that enormous number into some context, that means the total value of IT spending around the world is roughly the same as the gross domestic product of Germany.

Much of that 5.5 percent drop is a consequence of the strong dollar, which is making it more expensive for customers to buy products or services priced in dollars.

Hardware, including mobile phones, PCs, printers, servers, storage, and networking equipment, is going up in price in Europe this year, and will continue to go up in price through to the end of the year. Software, IT services, and communication services are all being affected, said Gartner, with customers putting off spending as a result.

For example, the price of PCs is going up, which will delay spending by customers. Similarly, businesses are likely to defer spending on data center equipment as a way of offsetting the price increases. Enterprise software spending is forecast to decline 1.2 percent in 2015, with revenue totalling US$ 654bn, although many software vendors will try not to raise prices as they try to expand their market share.

However, it's not all doom and gloom. When looked at in constant-currency terms, overall tech spending is still projected to grow 2.5 percent - although that's down from the 3.1 percent Gartner predicted in April.

"It looks like a crash. It is not a crash," said John-David Lovelock, research vice president at the analyst firm.

And not all of the drop in spending is down to the strong dollar: some of it is due to downward pressure on prices. Tech is getting cheaper, and we're still buying more of it, Lovelock points out, so some of this is actually good news for customers (if not suppliers).

For example, communication services is the largest single IT spending segment, at nearly US$ 1.5 trillion. But as such services become more of a commodity, suppliers are resorting to price cuts to win business.

No comments:

Post a Comment