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February 26, 2013

IT Spending Will Jump 5.5 Percent in 2013

Global IT spending increased close to six percent last year – as IT spending hit $2 trillion. That is slightly up from the 5.8 percent growth seen during 2011.

IDC (News - Alert) (International Data Corporation) released its report in the Worldwide Black Book, and it showed that total IT spending on hardware, software and IT services was $2 trillion in 2012. ICT spending (including telecom services) jumped 4.8 percent to reach $3.6 trillion, the report said. Looking ahead to the current year, IT spending will jump by 5.5 percent.

Fueling the growth are the many businesses and consumers acquiring mobile devices, storage, networks and software applications.

There were several forces impacting IT spending – such as the fiscal cliff issue in the United States, struggling economies in much of Europe, and the Asia/Pacific region often facing reduced exports.

In addition, U.S.-based IT suppliers were impacted by the strength of the dollar. “In U.S.-dollar terms, worldwide IT spending grew by just 3.3 percent. This marked a significant slowdown from the U.S. dollar growth rate of 9.5 percent recorded in 2011,” according to an IDC statement.

Also, the PC sector saw a two percent drop in revenue during 2012. Servers, PC monitors, and feature phones also saw lower revenue last year.

Tablets and smartphones continue to be popular, and in 2012 spending on smartphones was more than PCs – for the first time ever. Spending on smartphones was $300 billion in 2012, while PC spending dropped to $233 billion, according to news reports.

"Cannibalization is happening across the industry," Stephen Minton, vice president of IDC’s Global Technology (News - Alert) & Industry Research Organization, said about sector trends. "Smartphones have taken over from feature phones, tablet adoption is impacting PC spending, and the Cloud is affecting the traditional software, services and infrastructure markets. IT spending is still growing organically, but not at the same pace as prior to the financial crisis. Businesses are adopting IT solutions such as virtualization, automation, and SaaS (News - Alert) as a means to reduce the annual increases in their overall IT spending at a time when economic uncertainty remains high."

Also, IDC predicts that the U.S. economy will “stabilize” in the second half of 2013. But in Europe spending on technology during 2013 will edge up two percent percent. Debt issues there are a key concern. In 2013, growth in Europe will be less than one percent, when not including mobile devices.

Also, Japan will see zero percent growth this year, compared to IT spending jumping by four percent in 2012.

"This will be another tough year for mature economies," Minton said. "Weakness in Europe, as governments continue to impose austerity measures with a direct and indirect impact on IT spending, has also damaged the export-dependent Japanese economy. The U.S. should perform better, as long as politicians continue to reach 11th-hour deals to avert an economic crisis, and the PC market in the U.S. will at least stabilize after two successive years of major declines."

It is also noteworthy that there is “weaker” growth in Brazil, India and China, IDC said, but there is a belief many emerging markets will see “a stable economic outlook [which] will translate into improving IT spending trends.”

"We’re more confident about China than we were in the middle of 2012, when PC shipments were slowing and there was a sense that the economy had slowed down more quickly than the government had planned," Minton added. "Underlying IT demand remained strong, despite the volatile capital spending patterns that mainly affected PCs, and total IT spending in China still increased by 16 percent last year, which was only slightly down compared to 17 percent growth in 2011. We expect more of the same in 2013, even in spite of the inevitable slowdown in some emerging technology adoption rates as those markets gradually mature."

Meanwhile, Gartner (News - Alert) Group predicts global IT spending will be $3.7 trillion in 2013, which represents a 4.2 percent jump from spending levels in 2012. Their analysts too note “uncertainty” in the economy.

"Uncertainties surrounding prospects for an upturn in global economic growth are the major retardants to IT growth," Richard Gordon, managing vice president, Gartner, said in a statement carried by TMCnet. "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.”

In constant dollars, 2013 spending will a 3.9 percent increase, Gartner said. Spending on devices, including PCs, tablets, mobile phones and printers, will total $666 billion in 2013, Gartner said.

Edited by Brooke Neuman

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