According to the newly published International Data Corporation (IDC) Worldwide Black Book, recent volatility will gradually give way to a more positive outlook for IT spending in the second half of 2014.
With the U.S. and other mature economies mostly heading in the right direction and a significant commercial PC refresh cycle already underway, improvements in business confidence are set to drive a moderate infrastructure upgrade cycle over the next 12-18 months, while investments in software and services will continue to accelerate.
Worldwide IT spending is now forecast to increase by 4.5% in 2014 at constant currency, or 4.1% in U.S. dollars. A significant proportion of this growth is still being driven by smartphones – IT spending excluding mobile phones will increase by just 3.1% this year in constant currency (2.8% in U.S. dollars).
Aside from smartphones, the strongest growth will come from software, including rapidly expanding markets such as data analytics, data management, and collaborative applications including enterprise social networks. The 3rd platform pillars of Big Data, Social, Mobile and Cloud will continue to drive virtually all of the growth in IT spending, while spending on 2nd pPlatform technologies will remain effectively flat.
Meanwhile, although some emerging markets remain constrained by macroeconomic and geopolitical wild cards, there is now significant pent-up demand for IT investment that will drive stronger growth next year in markets including India, Brazil, and Russia.
While mature economies are still driving the upside in 2014, emerging markets will once again dominate in 2015.
Some IT market segments performed weaker than expected in the first quarter of 2014 (1Q14), in line with the weather-related slowdown in U.S. output and the impact of wild card events including the conflict in Ukraine. In particular, an overdue enterprise infrastructure refresh cycle was disrupted by short-term declines in business confidence. However, strong underlying demand for this investment cycle will drive improvements in the server, storage, and network infrastructure markets in the coming months.
The commercial PC refresh has proven stronger than originally forecast. As a result, IDC forecasts PC spending will increase by 3.5% in 2014 (the fastest pace since the post-financial crisis rebound of 2010). Western Europe has also seen an improvement in PC shipments, although PC spending in Europe will still be down by 1% due to average price declines. The PC cycle has already driven a market upturn in Japan, where economic growth and upcoming tax increases drove a surge in capital spending in 2013 (PC spending in Japan increased by 6% last year, but will decline by -4.5% this year).
The U.S. tablet market is now forecast to increase by just 2% this year, but will rebound to 7% growth in 2015 as the PC cycle begins to wane. Worldwide tablet spending has slowed from 29% year-over-year growth last year to 8% in 2014, but will accelerate back to double-digit growth next year (10%). Penetration rates in emerging markets such as China will continue to increase, while some enterprise spending will shift back to tablets.
The economic slowdown in 2013 had a negative impact on IT spending in China, but this also created a significant swell of pent-up demand that is now driving improvements in technology investment. IT spending growth in China decelerated to 8% last year but is on course for 13% growth in constant currency in 2014.
Excluding mobile phones, IT spending in China will increase by 5% this year (up from growth of just 2%, excluding phones, in 2013). Server spending in China will increase by 7% (compared to 0% in 2013), storage spending by 8% (up from 1.5% in 2013), and software by 9% (up from 7% last year), but overall market growth is still weighed down by the declining PC market.
Other emerging markets are likely to improve over the next 12 months as business confidence stabilizes. IT spending in India will increase by 15% next year, up from 8% in 2014. In Brazil, the market will accelerate from 10% growth this year to 13% next year. In Russia, where the crisis in Ukraine has damaged business and investor confidence since the beginning of the year, the market is set to decline slightly in 2014 before rebounding to 7% growth in 2015.
Mature economies have remained more stable since last year, with market growth often outpacing expectations. The U.S. IT market will increase by 4% this year, and Western Europe will maintain a 2% growth rate overall. Total worldwide IT spending will reach almost $2.1 trillion in 2014. Including telecommunications services, the worldwide ICT market will increase by 4% to $3.7 trillion, with telecom services growth of 4% driven by mobile data services and increasing broadband penetration.
IDC’s Worldwide Black Book provides forecasts for IT spending in 54 countries around the world. IT spending forecasts focus on 25 individual market segments across hardware, software, IT services, and telecom services for individual countries in all regions including North America, Latin America, Western Europe, Eastern Europe, Asia/Pacific, the Middle East, and Africa.