Gartner Forecasts Growth in IT Spending in 2016: 10 Key Points

Gartner has released its annual predictions about the IT industry. Here’s a look at how Gartner believes IT professionals will spend their budgets in 2016.

Worldwide IT spending across hardware, software, IT services and more will reach $3.5 trillion in 2016, up 0.6 percent compared with 2015, Gartner reported. In 2015, there was a nearly 6 percent decline in IT spending compared with 2014. Forecasts, at least, suggest 2016 will be a better year than 2015.

Although 2015 was a down year on paper, the real issue may not have been in the technology industry, according to Gartner. The research firm reported that as the value of the U.S. dollar rose and currencies around the world were increasingly devalued, purchasing fell off a cliff. Gartner is expecting those “headwinds” to cease in 2016.

Data centers may represent the smallest portion of the IT market, but they’re still growing. In fact, data center spending growth will be up 3 percent to $175 billion in 2016. Unlike every other market segment, in 2015 data center spending was up (1.8 percent) as well.

While software sales were down 1.4 percent in 2015, the segment will see 5.3 percent growth to $326 billion in 2016. Part of that growth will be due to some of those currency “headwinds” that Gartner found in its research, though it may also be due to strong growth in certain segments of the market where new software would be needed, such as servers.

The story of hardware is one that cannot be told so easily. In general, hardware sales will fall by 1.9 percent compared with 2015 to $641 billion. However, Gartner notes that PCs and smartphones, among other devices, will be popular purchases in 2016. The issue for the broader devices market is that many companies will shift their purchases to lower-cost products, thereby reducing revenue.

IT services encompass a wide range of things, including the cloud. And it’s clear from Gartner’s predictions that it’s a good business to be in. According to Gartner, IT services will be up 3.1 percent in 2016, generating $940 billion in total revenue. The company says accelerated spending in the cloud and “buyer acceptance of the cloud model” will help that segment grow.

What matters most, however, is communications services. That segment will generate nearly half of the entire IT industry’s revenue in 2016, notching $1.5 trillion in total spending. That figure, though, will be down 1.2 percent compared with 2015. Despite mobile usage only increasing in the coming years, Gartner believes that the death of roaming charges will outshine any gains companies would expect from heavy demand for wireless data.

Tablets are proving to be an issue for the IT industry, according to Gartner. The company expects “weak tablet adoption” around the world, and even in places where it initially expected tablets to be popular, consumers and enterprise users aren’t showing much interest.

Emerging markets weigh heavily in the Gartner study. While the U.S. and Western Europe will still account for a large portion of the overall revenue, Gartner says that 2016 will be a critical year for companies targeting and competing in emerging markets. In those critical areas, demand should be high, but “escalating political and economic challenges” may rein in overall spending. Gartner believes companies in those markets will need to balance “cost cutting with growth opportunities” in 2016, which could weigh heavily on budgets.

Although worldwide IT spending will rise nearly 1 percent in 2016, that doesn’t quite tell the whole story. Gartner says that 2016 will be unable to catch 2014 in total spending, when it hit $3.7 trillion. What’s worse, the company reports that overall IT spending won’t reach 2014 levels until 2019, at the earliest. So, while things may be getting better, Gartner doesn’t anticipate a full reboot for a few years.