IT Spending to Reach $3.7 Trillion in 2014, but Growth Slows

By Nathan Eddy  |  Posted 2014-06-30
IT spending and gartner

Although worldwide IT spending is expected to total an impressive $3.7 trillion in 2014--a 2.1 percent increase from last year--this grow rate is lower than earlier projections of 3.2 percent, according to a study by IT research firm Gartner.

The devices market, which includes PCs, mobile phones, tablets and printers, is forecast to grow in 2014, but not as much as predicted in the previous quarter’s forecast, reaching $685 billion, a 1.2 percent increase from 2013, thanks to lower price points across mobile phones and tablets.

In the enterprise software market, spending is on pace to total $321 billion, a 6.9 percent increase from 2013, while telecom services spending is projected to grow 0.7 percent in 2014, with spending reaching $1.6 trillion.

The report projected voice average revenue per user (ARPU) will decline by about 10 percent annually through 2018 because of a decline in consumer use of voice services—particularly among prepaid users.

"Increased competition between communication services providers is leading to price competition," Richard Gordon, managing vice president at Gartner, said in a statement. "Emerging low-cost or free/advertisement-subsidized mobile data services and low-cost services from mobile virtual network operators that target less-lucrative segments are impacting ARPU more than initially expected."

Slightly increased growth expectations for infrastructure software in the enterprise software market have put spending on pace to total $321 billion, a 6.9 percent increase from 2013.

However, slower growth is expected in the enterprise applications market, specifically office suites and digital content creation (DCC), which the report noted were being impacted by slow PC sales and the rapid move to cloud-based offerings by a wide variety of organizations and professionals.

Following weak vendor performance in 2013 across multiple geographies and segments, modestly improved spending is expected in the IT services market through 2014, totaling $967 billion in 2014, up 3.8 percent from 2013.

"Price pressure based on increased competition, lack of product differentiation and the increased availability of viable alternative solutions has had a dampening effect on the short term IT spending outlook," Gordon said. "However, 2015 through 2018 will see a return to ‘normal’ spending growth levels as pricing and purchasing styles reach a new equilibrium. IT is entering its third phase of development, moving from a focus on technology and processes in the past to a focus in the future on new business models enabled by digitalization."

Constrained spending levels continue to negatively impact the revenue opportunity for data center systems, particularly with external controller-based (ECB) storage, but the sector is still expected to grow, with data center systems spending projected to reach $140 billion in 2014, a 0.4 percent increase from 2013.

The report also noted the server market is also showing signs of weakness as enterprises migrate away from high-cost platforms toward lower-cost alternatives.

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