The half year mark is when the major technology research organizations recalibrate their technology predictions. This year is no different, with both Forrester Research and Gartner recasting their forecasts.
Forecasting technology markets, like forecasting the weather, is an inexact science but a topic that draws much discussion. In 2013 the major trends of mobile, cloud, social and bring your own device are rapidly altering the enterprise technology market.
When you consider Microsoft reorganizing itself into a services operation, Dell working desperately to go private, Lenovo as the new leader in a declining personal computer market, and Samsung and Apple as the smartphone leaders, you get an idea of just how rapidly the tech globe is spinning.
Forrester dropped its global technology spending forecast from a 3.3 percent increase at the start of the year to a midyear correction of 2.3 percent. What happened? Forrester researchers stated that while the U.S. and Japanese markets have performed well, Europe and China have lagged while Latin America has been an uneven performer.
As Forrester analyst Andrew Bartels wrote in his blog, “Software—especially for analytical and collaborative applications and for software-as-a-service products—continue to be a bright spot, with 3.3% dollar growth and 5.7% in local currency-terms. Apart from enterprise purchases of tablets, hardware—both computer equipment and communications equipment—will be weak. IT services will be mixed, with slightly stronger demand for IT consulting and systems integration services than for IT outsourcing and hardware maintenance.”
For its part, Gartner analysts are following mostly the same story line as Forrester. Gartner revised its projections as follows: “Worldwide IT spending is projected to total $3.7 trillion in 2013, a 2 percent increase from 2012 spending of $3.6 trillion.” Enterprise software with a 6.4 percent growth rate and tablets with a 38.9 percent (!) growth rate were high points, while the clifflike falloff of the PC business and a less than 1 percent growth in telecom services dragged the projections downward.
What does the readjusting of the forecasts mean? That is difficult. While you can measure actual spending (somewhat, although not a perfect science), it is much more difficult to get at substitute spending and redirected spending.
Amazon Web Services has grown to a nearly $4 billion business (best guess), and that growth has spurred Rackspace, IBM, Hewlett Packard, Google and Microsoft to speed the introduction of their cloud services. If you, as a technology manager, shift your dollars from building out a new data center to subscribing to cloud services, the hardware budget shrinks and services budget grows, but forecasters can’t catch the difference. What does that $4 billion in Web services represent in terms of lost hardware sales?
The same is true for the bring-your-own-device (BYOD) business. As companies move from being reluctant to allow BYOD units to connect to the corporate network to being enthusiastic proponents of BYOD, the lost corporate device sales now shifted to personal devices are difficult to measure. When Google or Facebook go out and build their own servers, the “other” slice of the server market grows while the named vendor slice shrinks.
All this goes to highlight the difficulty of forecasting a market that is changing beneath your feet. While you can add up actual spending, measuring lost opportunities, shifts in customer preferences and the attributes that cause corporate IT to abandon, for example, in-house development projects in favor of contracting with cloud services is not something that can be easily plugged into a spreadsheet.
Each technology customer is different and while the big worldwide numbers are fun to ponder, the true forecast will develop when the sentiment of those individual customers can be gathered and analyzed to predict just where technology spending will head in the future.
Eric Lundquist is a technology analyst at Ziff Brothers Investments, a private investment firm. Lundquist, who was editor-in-chief at eWEEK (previously PC Week) from 1996-2008, authored this blog for eWEEK to share his thoughts on technology, products and services. No investment advice is offered in this blog. All duties are disclaimed. Lundquist works separately for a private investment firm which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.