10 Key Findings From Gartner’s Rosy Worldwide IT Spending Study

Gartner predicts a pickup in IT spending in 2017, thanks to increasing interest in software and communications services. This is a welcome change after a few years of contraction in some IT segments.

The worldwide IT market will see major growth in 2017, according to Gartner. The research firm predicts that total global IT spending next year will rise 2.9 percent to $3.5 trillion. By the end of 2016, Gartner believes total spending will reach $3.4 trillion, a 0.3 percent decline compared to 2015.

Software will continue to be one of the major contributors to the IT market’s growth. Next year, software spending will jump 7.2 percent to $357 billion. Despite a troubled market in 2016, software was one of the few bright spots, estimated to grow 6 percent year over year to $333 billion.

The IT services market segment will watch its revenues climb 4.8 percent next year to $943 billion. IT services has been growing consistently over the past several years, and likely will close out 2016 with $900 billion in revenue.

Hardware spending has been a troubled segment for years, but Gartner believes that will change next year. The company says that the devices segment will grow its revenue by 0.4 percent year over year to land at $600 billion in revenue.

Communications services continue to be one of the main reasons the IT industry is so big. This year, communications services revenue will hit $1.38 billion, but will top $1.4 billion by the end of next year. There are no signs of communications services slowing down any time soon.

Although the IT market has been somewhat politics-proof in the past, that’s not the case any longer. According to Gartner, the U.K.’s decision to exit the European Union, known as Brexit, had a profoundly negative impact on global IT spending. Companies around the world have taken a wait-and-see approach to Brexit, causing them to spend less. Changes in currency exchange rates also have put a pause on spending. However, in 2017, Gartner believes companies will invest more heavily in IT to position themselves more effectively to manage the Brexit fallout.

Although data center spending will grow by 2 percent year over year in 2017, it’s still a soft spot in the broader marketplace. Next year, data center systems will generate $177 billion in revenue, making the segment substantially smaller than any other. The second-smallest segment, software, will generate $357 billion in revenue next year.

Although U.K. politics will affect IT spending, U.S. politics will not. Gartner analyzed how the 2016 presidential election could affect IT spending and found that regardless of who wins—Republican Donald Trump or Democrat Hillary Clinton—there will be no meaningful impact on how much companies spend on IT.

Last year and into the beginning of this year, most analysts—including Gartner—believed the IT industry will would see significant revenue growth in 2016. However, global IT spending was taken down a few pegs by the Brexit vote and unexpected softness in demand for all types of hardware, including tablets, PCs and, to a lesser extent, smartphones. In short, a confluence of unexpected events negatively affected the industry.

Despite troubles facing the IT industry this year, there are expected to be some winners. For instance, IT services spending is expected to grow 3.9 percent year over year to $900 million in revenue. The software segment will grow at an even quicker 6 percent annual growth rate to land at $333 million. One of the key soft spots was hardware sales, which are expected to fall 7.5 percent year over year in 2016. Communications services are expected to see a revenue decline of 1.1 percent for the year.