Australia has bucked a global downward trend in IT spending, with Gartner expecting Australian IT spend to increase 2.1% this year.
The increase, which will see Aussie IT spend reach almost AU$78.1 billion for 2015, flies in the face of worldwide declines which see global IT spend down 5.5%, according to Gartner’s latest quarterly Worldwide IT Spending Forecast, which provides a ‘pulse check’ on the health of the hardware, software, IT services and telecom market.
IT services represents the largest spending category – and a key opportunity for Australian resellers – accounting for AU$28.8 billion in spend.
However, it is the software market which is the fastest growing area of spending, with the industry analysts predicting 9.8% growth in 2015 to reach almost AU$9.4 billion.
The Asia Pacific market is forecast to increase 0.7% from 2014 to hit US$743 million, while New Zealand IT spend is expected to decline 0.8% to NZ$11.4 billion.
Globally, Gartner says IT spending is on pace to total $3.5 trillion in 2015, a 5.5% decline from 2014.
However, Gartner notes that the downward figures are largely driven by currency fluctuations, with analysts attributing the global decline to the rising US dollar. In constant currency terms, the market is actually projected to grow 2.5%.
The Asia Pacific market would also be up 4.5% in constant currency terms.
“We want to stress that this is not a market crash,” says John-David Lovelock, Gartner research vice-president. “Such are the illusions that large swings in the value of the US dollar versus other currencies can create.”
He says there are secondary effects to the rising US dollar. “Vendors do have to raise prices to protect costs and margins of their products, and enterprises and consumers will have to make new purchase decisions in light of the new prices.”
Lovelock says the news isn’t a glum as it initially looks.
“IT activity is stronger than the growth in spending indicates.
“Price declines in major markets like communications and IT services, and switching to ‘as-a-service’ deliver, mask the increase in activity,” he says.
Breaking it down
All five segments measured by Gartner – devices, data centre systems, enterprise software, IT services and communications services – see a drop, ranging from -1.2% for enterprise software to -7.2% for communications services.
Communications services continues to be the largest IT spending segment in 2015, accounting for $1.5 trillion in spend. But Gartner warns that this segment is also experiencing the strongest decline, at 7.2%, among the five IT sectors with price erosion and competitive threats preventing revenue growth in proportion to increasing use within most geographical markets.
Devices see a 5.7% drop in spending. Gartner says mobile phones continue to be the leading segment within the device market, with growth in Apple phone, especially in China, keeping overall phone spending consistent.
But Gartner predicts that is coming to an end, with smartphone unit growth expected to start to flatten.
The PC and tablet market continues to weaken, with an expected 10% increase in average PC pricing in currency-impacted countries going ahead and delaying purchases even more than expected.
Excessive PC inventory levels, especially in Western Europe, need to be cleared, Gartner says, and that will delay Windows 10 inventory in the second half of the year.
In the data centre systems segment, storage and network markets are expected to see weaker growth in US dollar terms as a result of the appreciation of the US dollar.
Enterprise budgets for data centre systems in local spending are expected to remain stable for the year, with users extending life cycles and deferring replacements as a means of offsetting price increases.
The overall near-term data center weakness is slightly offset by a more positive outlook for the server market, with the server market is benefiting from a stronger-than-expected mainframe refresh cycle, as well as increased expectations for hyperscale spending.
Enterprise software spending is forecast to decline 1.2% in 2015, to $654 billion. Gartner says many software vendors will try not to raise prices because software-as-a-service is about market share, not profitability. Raising prices could take software vendors out of a sales cycle, and these vendors don't believe they can afford to lose a client.
IT services spending in 2015 is projected to decline 4.3% with Gartner expecting modest increased spending on consulting in 2015 and 2016, as vendors have demonstrated their ability to stimulate new demand from buyers looking for help with navigating business and technology complexities, particularly related to building a digital business.
However, the forecast for implementation services has been slightly reduced.
“Increasingly, buyers prefer solutions that minimise time and cost of implementation, driving demand for more-efficient delivery methods, out-of-the-box implementation, and lower-cost solutions,” Gartner says.