Third-quarter IT spending: analysis and outlook

1Executive Summary

We’ve dramatically decreased our worldwide IT spending forecast to a 1.8 percent growth rate in 2013. That cuts our prior forecast for the year in half, resulting in a growth rate of just over 3.8 percent, lower than 2012’s rate. While we’ve been looking for a rebound, all we see are indicators of economic improvement coupled with pricing pressure in key hardware segments (especially smartphones and tablets) and service markets that are dampening the outlook.

The second-quarter vendor financial reports disappointed once again but not by as much as in the first quarter of 2013. We had another serious readjustment of the 2013 forecast for smartphones and tablets, but that area is still the only one in which hardware spending is growing. Service revenue weakened dramatically, as the leaders are exiting, reformulating offerings, or being trimmed by cloud offerings. Software is holding its own with cross-industry (SaaS territory) and industry-specific software continuing to be the spending bright spot. We see public cloud Infrastructure as a Service (IaaS) growing at 15 percent and Software as a Service (SaaS) growing at 17 percent in 2013. On-premise and public clouds (and hybrids) are driving systems and management software growth. Cloud, SaaS, mobility, social, analytics, big data, software-defined data centers, convergence, flash, and business-process transformation continue to be the bright investment spots for users and vendors, but they still represent a relatively small part of the market action.

The U.S. economy has been carrying the IT market, but the spotty results elsewhere are holding back IT growth. Optimists are still looking for a relatively robust second half of 2013: In part that’s a function of the pretty terrible second half of 2012 and the recovery we’re seeing in Europe and China.

Tired of hearing that growth will pick up six months from now, the industry now seeks an inflection point that suggests reinvigorated (or less moribund) overall spending. There may be a new normal of low growth for IT, but even with that low bar of comparison, IT spending is doing relatively poorly. Bumping along the bottom is not a good place to be.

We’ll be looking at 2014 once the data for the third quarter of 2013 is in.

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

Market segment

2011

2012

2012 growth rate

2013

2013 growth rate

Note

Smartphones and tablets

$213

$265

24.4%

$281

6.0%

Smartphones and tablets

Hardware

$429

$419

-2.3%

$416

-0.7%

PCs, servers, storage, peripherals, network

Software

$256

$270

5.5%

$290

7.4%

Systems, middleware, solutions

Service

$797

$809

1.0%

$807

-0.2%

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

All spending

$1,695

$1,763

3.8%

$1,794

1.8%

 Source: Ralph Finos/GigaOM Research

Relevant analyst in Android
You must be logged in to post a comment.

No Comments Subscribers to comment

Explore Related Topics

Learn about our services or Contact us: Email / 800-906-8098