Tech spending expected to escape the recent doldrums
By Marc Ferranti
As the economy improves and at least some of the concerns about the so-called U.S. “fiscal cliff” are resolved, desire for new mobile, analytics, and storage technology will drive information technology spending this year, according to market researchers and economists.
The first batch of IT spending forecasts for the year are already in, and they look positive relative to the doldrums the tech industry was in during the last six months.
Businesses buy tech
Global IT purchases will increase by 3.3 percent in 2013, in terms of U.S. dollars, to US$2.1 trillion, according to a Forrester report released this week. Because the dollar has been strong relative to other currencies recently, however, a better way to understand IT spending growth is to look at the spending increase in terms of local currencies, according to Andrew Bartels, chief economist at Forrester. In local currency terms, IT spending growth this year will be a relatively healthy 5.4 percent, he noted.
Next year will be even better, with worldwide spending on IT increasing 6.1 percent in U.S. dollars and 6.7 percent in terms of local currencies, Forrester forecasts.
The partial deal on the fiscal cliff reached by the U.S. Congress this week will help unlock corporate coffers, Bartels said. The fiscal cliff was a series of government spending cuts and tax hikes set to kick in during 2013 if a budget compromise was not reached. Congress worked through New Year’s eve and New Year’s day to reach a compromise on taxes, which calls for, among other things, an increase on income taxes only for the wealthiest Americans, though a payroll tax on wages will come into effect.
Congress still needs to work out an agreement on government spending over the next two months. “But two-thirds of the impact of the fiscal cliff had to do with taxes,” Bartels said. “Especially in the second half of 2012, you had U.S. businesses go into a capital spending freeze because of worries about going into a fiscal cliff recession.”
Removing much if not all of those concerns also removes many barriers holding back U.S. investments on new technology, particularly around mobility, analytics and collaboration software, said Bartels.
In addition, as Europe continues to comes to terms with its debt problems and climbs out of recession, and China resolves political problems around a transition in leadership, areas of the world outside of the U.S. will also start to grow faster in 2013, leading to greater IT spending in 2014, Forrester said in its report.
Biggest buy: Software
Software, at $542 billion, will remain the largest category of global IT purchases in 2013, and will experience growth of 4.4 percent in dollar terms, IDC said. Computer equipment, at $416 billion, is the second-largest category, but will remain weak with just 2.1 percent growth this year, Forrester said, after 1.2 percent growth in 2012.
In tight economic times, corporations tend to rein in hardware spending, letting users continue to use older machines, Bartels pointed out. But an improving world economy will set the stage for a release of pent-up demand next year.
Data from other market researchers broadly back up the trends seen in the Forrester outlook. For example, broad economic uncertainty and weak demand for PCs led IDC to reduce its expectations for semiconductor growth for both 2012 and 2013. In a report issued just before the new year, IDC said semiconductor revenue for 2012 would end up being $304 billion, up less than 1 percent. That was significantly less than the 4.6 growth rate predicted in July. However, semiconductor revenue will rise 4.9 percent to $319 billion in 2013 and reach $368 billion in 2016, IDC said.
Priorities: security, mobile gadgets
Meanwhile, enterprises buying new mobile devices and investing in security and storage management will give IT spending a boost in 2013, said Gartner this week. Gartner forecasts worldwide IT spending, in terms of U.S. dollars, to increase by 4.2 percent this year to total $3.7 trillion. The difference in the Gartner and Forrester figures is due in part to Gartner’s inclusion of telecom in its calculations; Forrester breaks out telecom spending into a separate report.
“Uncertainties surrounding prospects for an upturn in global economic growth are the major retardants to IT growth,” said Richard Gordon, managing vice president at Gartner, in a statement about the report. “This uncertainty has caused the pessimistic business and consumer sentiment throughout the world. However, much of this uncertainty is nearing resolution, and as it does, we look for accelerated spending growth in 2013 compared to 2012.”
But corporate planners are apparently not entirely certain that the world economy is out of the woods yet, cautions Computer Economics, which provides metrics for IT management, in a new report. “As IT budget planners look to the year ahead, they are expecting growth in IT operational budgets close to what occurred in the previous year, about 2.5%, while IT capital investments plans are flat and IT hiring plans are on hold,” the firm said. “Until a clearer picture of the economy emerges, large enterprises are preparing for a slow-growth environment.”
Editor’s note: Two errors in attribution were corrected in this story on January 7, 2013.