Rising US dollar sees IT spend stagnate

Global IT spending is forecast to total US$3.54-trillion dollars in 2016. That’s a big number, but it’s only 0.6% larger than it was in 2015 and is actually significantly smaller (by around US$216-billion dollars) than the amount spent in 2014.

That’s according to technology research house Gartner, which notes that a large reason for the decline in spending is a rising US dollar. As a consequence, IT spend isn’t expected to hit 2014 levels until at least 2019.

“The rising US dollar is the villain behind 2015 results,” said John-David Lovelock, research vice president at Gartner. “US multinationals’ revenue faced currency headwinds in 2015. However, in 2016 those headwinds go away and they can expect an additional five percent growth.”

According to Gartner, the devices market is set to be hard hit, and is forecast to decline 1.9% in 2016. The combination of economic conditions preventing countries such as Russia, Japan and Brazil from returning to stronger growth, together with a shift in phone spending in emerging markets to lower-cost phones, is overlaid with weak tablet adoption in regions where there was an expectation of growth.

Read more: Gartner: people are hungrier than ever for devices

Ultramobile premium devices are expected to drive the PC market forward with the move to Windows 10 and Intel Skylake-based PCs. Gartner has however slightly reduced the speed of adoption over the forecast period, as buying in Eurasia, Japan, and the Middle East and North Africa moves away from purchasing these relatively more expensive devices in the short term, but expect them to revert back to buying in 2017 as the economic environment stabilises.

Data centre systems’ spending is projected to reach US$75-billion in 2016, a three percent increase from 2015. The server market is the segment that has seen the largest change since the previous quarter’s forecast.

According to Gartner, the server market has seen stronger-than-expected demand from the hyperscale sector, which has lasted longer than expected. Typically, this segment has spikey demand which lasts for a couple of quarters before moderating. Demand in this segment is expected to continue to be strong through 2016.

Read more: 10 top strategic technology trends for 2016

The worsening economic environment in emerging markets has had little effect on the global enterprise software spending forecast for 2016, with IT spending on pace to total US$326-billion, a 5.3% increase from 2015. However, key countries in emerging markets, particularly Brazil and Russia, face escalating political and economic challenges. Organisations in those regions must balance cost cutting with growth opportunities during times of economic concern.

Spending in the IT services market is expected to return to growth in 2016, following a decline of 4.5% in 2015. IT services spending is projected to reach 940 billion in 2016, up 3.1% from 2015. This is due to accelerating momentum in cloud infrastructure adoption and buyer acceptance of the cloud model.

Telecom services spending is projected to decline 1.2% in 2016, with spending reaching US$1 454-trillion. The segment will be impacted by the abolition of roaming charges in the European Union and parts of North America. While this will increase mobile voice and data traffic, it will not be enough to counter the corresponding loss of revenue from lost roaming charges and premiums.