IT Spending Falls Across the Board, Gartner Report Projects

Spending is expected to fall across the board, from data center systems to devices, spending on which is projected to fall 5.7 percent.

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Worldwide IT spending is on pace to total $3.5 trillion in 2015, a 5.5 percent decline from 2014, according to a report from IT research firm Gartner, which the company's analysts attributed to the rising U.S. dollar.

The report noted that in constant-currency terms, the market is projected to grow 2.5 percent, but in Gartner's previous forecast in April, it had forecast IT spending to decline 1.3 percent in U.S. dollars and grow 3.1 percent in constant currency.

Gartner expects modest increased spending on consulting in 2015 and 2016, as vendors have demonstrated their ability to stimulate new demand from buyers looking for help with navigating business and technology complexities, particularly related to building a digital business.

However, the forecast for implementation services has been slightly reduced, and the report noted that increasingly, buyers prefer solutions that minimize time and cost of implementation, driving demand for more-efficient delivery methods, out-of-the-box implementation and lower-cost solutions.

Spending is expected to fall across the board, from data center systems (down 3.8 percent) to devices, which are projected to fall 5.7 percent.

The report noted that enterprise budgets for data center systems in local spending are expected to remain stable for the year, with users expected to extend life cycles and defer replacements as a means of offsetting the price increases.

Enterprise software spending is expected to fall by 1.2 percent, with revenue totaling $654 billion, while spending on IT services will take a 4.3 percent dip and communications services spending will fall the most, by 7.2 percent—however, communications services spending will continue to be the largest IT spending segment in 2015 with spending at nearly $1.5 trillion.

On the enterprise software front, Gartner analysts said many software vendors will try not to raise prices because software as a service (SaaS) is about market share, not profitability, and warned raising prices could take software vendors out of a sales cycle, and these vendors don't believe they can afford to lose a client.

The report said price erosion and competitive threats in communications services are preventing revenue growth in proportion to increasing use within most national markets.

In addition, the PC and tablet market continues to weaken, with the expected 10 percent increase in average PC pricing in currency-impacted countries going ahead, delaying purchases even more than expected.

Excessive PC inventory levels, especially in Western Europe, need to be cleared, which will delay Windows 10 inventory in the second half of the year, the report noted.

Gartner's IT spending forecast methodology relies on analysis of sales by thousands of vendors across the entire range of IT products and services.

The company uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data upon which to base its forecast.