Second-quarter IT spending: analysis and outlook

1Executive Summary

Vendor financial reports from the first quarter of 2013 point to a total 2013 worldwide IT spending growth rate of 3.8 percent, identical to the 2012 growth rate. Cloud, SaaS, mobility, social, analytics, big data, software-defined data centers, convergence, flash, and business-process transformation continue to be the bright spots but still represent a minority of the market action. Cross-industry (SaaS territory) and industry-specific software also continue to be the spending bright spots. We had a serious readjustment of the 2013 forecast for smartphones and tablets, but it’s still the locus of where hardware spending is growing. Overall cloud spending is growing in the mid-teens.

We’re close to the second half of 2013, and the news (besides the stock market) has been largely disappointing for traditional IT spending. This is due to the transformational impact of the trends above leading to a sharp distinction between what’s valuable in IT and what’s a commodity. We’re still looking for an inflection point that will invigorate overall spending, but the news is spotty with some fundamental drags that are likely to impede moving the meter much this year. Like 2012, 2013 looks like another transitional year to the next wave of IT value that we won’t be seeing in earnest until 2014 at the earliest.

Looking forward in 2013, the optimists are predicting a killer second half. Given the fundamentals, it’s hard to see where that is going to come from. The June earnings reports from Oracle, Adobe, and Tibco suggest that we should be ready for similarly weak Q2 2013 results from the bulk of vendors when they report in July and August.

Table 1. 2012 and 2013 worldwide IT spending (in billions)

Market segment 2011 2012 2012 growth rate

2013

2013 growth rate

Note
Smartphones and tablets

$213

$265

24.4%

$298

12.4%

Smartphones and tablets
Hardware

$429

$419

-2.3%

$418

-0.3%

PCs, servers, storage, peripherals, network
Software

$256

$270

5.5%

$291

7.7%

Systems, middleware, solutions
Service

$797

$809

1.0%

$824

1.8%

Consulting, IT outsourcing, systems integration, BPO, education and training, maintenance
All spending

$1,695

$1,763

3.8% $1,830 3.8%

Source: Ralph Finos/GigaOM Research

Relevant analyst in middleware
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