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Global ICT sector to hit $3.7tn

Johannesburg, 04 Jan 2013
Global spending on IT is expected to hit at least $3.7 trillion in 2013, a 4.2% gain on 2012, as economies start to recover.
Global spending on IT is expected to hit at least $3.7 trillion in 2013, a 4.2% gain on 2012, as economies start to recover.

Uncertainties around global economic growth, which have muted demand for IT equipment, are being resolved, and 2013 is expected to see improved spending compared with last year, with predictions of between 4.2% and 6.9% being made.

This week, the US struck a deal that effectively averts the threatened "fiscal cliff", which would have led to higher taxes and budget cuts. In Europe, which continues to feel the hangover of the last recession in 2008, people are starting to become accustomed to austerity measures.

Research firm Gartner says worldwide IT spending is projected to total $3.7 trillion in 2013, a 4.2% increase from 2012's $3.6 trillion. Gartner has revised its projection upward from the 3.8% it predicted in the third quarter.

Richard Gordon, managing VP at Gartner, says uncertainties around prospects for an increase in global economic growth have led to pessimistic business and consumer sentiment throughout the world.

While the uncertainties surrounding the global economy are the major retardants to IT growth, "much of this uncertainty is nearing resolution, and as it does, we look for accelerated spending growth in 2013 compared to 2012", says Gordon.

Fellow market research firm IDC says worldwide IT spending will grow 6.9%, "surprisingly solid growth in a fragile, recovering economy". Emerging markets' IT spending will grow 13.8%, driving a whopping 53% of IT growth, it notes.

Must have

Absa Investments analyst Chris Gilmour explains that IT spending is coming out of the doldrums on the back of improved global conditions. He says the US deal, while a watered-down version of what president Barack Obama wanted, is better than expected.

In addition, the US economy should grow at about 2% this year, which is not a bad rate, says Gilmour. He says that, at long last, there are positive indicators coming out of the US, while Europeans are becoming used to austerity measures put in place to cut down on spending.

In 2008, the world saw one of the worst global crises since the Wall Street crash of 1929, which led to the great depression. The financial crisis resulted in the collapse of global banking giants such as Lehman Brothers.

Gilmour says ICT spending always grows at about double the rate of improvement in gross domestic product, as businesses need systems to be competitive. He notes that cutting back on IT is short-sighted, and that spending will grow as economies improve.

Drivers

Gartner says enterprise software spending, mobile data and device spending are expected to be the main drivers in the IT spending increase. According to IDC, mobile devices, apps and emerging markets will be the biggest growth drivers, while European debt issues will dominate downside risks.

Gartner notes, however, that much of the spending increase is the result of projected gains in the value of foreign currencies versus the dollar. When measured in constant dollars, 2013 spending growth is forecast to be 3.9%.

The research firm forecasts worldwide enterprise software spending to total $296 billion in 2013, a 6.4% increase from 2012, driven by key markets such as security, storage management and customer relationship management.

However, beginning in 2014, markets aligned to big data and other information management initiatives, such as enterprise content management, data integration tools and data quality tools, will start to see increased levels of investment, Gartner says.

Speeding up

Gartner points out that the global telecoms services market continues to be the largest IT spending market. It predicts that growth in this sector will be predominately flat over the next several years as revenue from mobile data services compensates for the declines in total spending for both the fixed and mobile voice services markets.

By 2016, Gartner forecasts that mobile data will represent 33% of the total telecoms services market, up from 22% in 2012. Worldwide device spending, which includes PCs, tablets, mobile phones and printers, is forecast to reach $666 billion in 2013, up 6.3% from 2012, it notes.

However, the firm points out that this is a significant reduction in the outlook for 2013 compared with the previous forecast of $706 billion in worldwide device sales and 7.9% growth. The long-term forecast for worldwide spending on devices has been reduced as well, with growth from 2012 through 2016 now expected to average 4.5% annually in current US dollars (down from 6.4%) and 5.1% annually in constant dollars (down from 7.4%).

These reductions, says Gartner, reflect a sharp drop in the forecast growth in spending on PCs and tablets that is only partially offset by marginal increases in forecast growth in spending on mobile phones and printers.

"The tablet market has seen greater price competition from Android devices as well as smaller, low-priced devices in emerging markets," Gordon says. "It is ultimately this shift towards relatively lower-priced tablets that lowers our average selling prices forecast for 2012 through 2016, which in turn is responsible for slowing device spending growth in general, and PC and tablet spending growth in particular."

However, IDC adds that mobile devices will out-ship PCs by more than two to one and generate more revenue than PCs for the first time.

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