The global IT industry will feel the repercussions of England’s Brexit vote to leave the European Union, according to Gartner analysts.
The market research firm on July 7 predicted that global IT spending this year will hit about $3.41 trillion, which is flat when compared with spending last year. It’s also an improvement from the 0.5 percent decline that Gartner analysts predicted earlier this year, with the change in forecast primarily due to fluctuations in currencies.
However, the forecast was developed before the majority of British residents in the June 23 Brexit vote elected to have the country leave the European Union, a move that immediately drove down the value of the British pound, upended the country’s political scene and continues to ripple through the English economy.
“The current Gartner Worldwide IT Spending Forecast assumes that the UK would not exit the European Union,” John-David Lovelock, research vice president with Gartner, said in a statement. “With the UK’s exit, there will likely be an erosion in business confidence and price increases which will impact UK, Western Europe and worldwide IT spending.”
What all the fallout from the Brexit vote will be isn’t yet known, but Gartner analysts said it will quickly affect IT spending in the United Kingdom and in Europe, with staffing likely to be the most significant immediate issue. Because of the uncertainty regarding work status in the country, new foreign workers will be less likely to want to work there, and the difficulty in keeping non-UK staff and hiring new employees from outside the United Kingdom will hurt IT departments in England.
All this comes at a time of significant change in the business and IT worlds, according to Lovelock.
“2016 marked the start of an amazing dichotomy,” he said. “The pace of change in IT will never again be as slow as it is now, but global IT spending growth is best described as lackluster.”
Enterprises are becoming digital businesses and turn their attention to new initiatives like the Internet of things (IoT), and they’re looking for ways to reduce costs to fund these efforts and simplify operations, including using software-as-a-service (SaaS) rather than spending on software licenses, voice-over-LTE (VoLTE) rather than cellular services and digital personal assistants rather than people.
“It is precisely this new breadth of alternatives to traditional IT that will fundamentally reshape what is bought, who buys it and how much will be spent,” Lovelock said.
Spending on data center systems, software and IT services will grow this year, while spending on devices and communications will decline, according to Gartner’s numbers.