Global IT Spending Tumbles, Could Harm Datacenters

Declining IT spending in China—one of the powerhouses of the global economy—could drag down the global IT market, according to research firm IDC.

A general economic slowdown in China has led IDC to lower its expectations for the growth of IT sales worldwide from 4.9 percent to 4.6 percent. That numerical change might be small, but represents a drop of almost 30 percent compared to the nearly 6 percent growth in global IT spending during 2012.

The growth rate in IT spending was stable at to 6 percent during 2011 and 2012, after recession-driven spikes downward to -4 percent in 2009 and back up to 8 percent in 2010, IDC figures show.

Global sales of smartphones and tablets have buoyed up the IT market in general, but aren’t enough to compensate for weakness in Europe, parts of South America, and the Asia/Pacific region, according to IDC. “With the economic outlook uncertain for the second half of this year, we remain focused on the downside risks associated with China and Western Europe,” according to Stephen Minton, analyst in IDC’s Global Technology and Industry Research Organization. “IT spending in Europe remains tepid by any historical standards.”

That data echoes Forrester’s report from July, in which expectations for global IT sales in 2013 dropped from 3.3 percent to 2.3 percent.

Growth in the U.S. and Japan outpaced Forrester projections during the first half of the year, but “deteriorating” markets in Europe and China—primarily in sales of computer and telecommunications hardware—brought down the total, Forrester found.

Most of the global IT market has been dragged down by sagging sales of PCs—which dropped 10.9 percent during the second quarter of 2013 compared to the same quarter last year, according to Gartner. “We are seeing the PC market reduction directly tied to the shrinking installed base of PCs, as inexpensive tablets displace the low-end machines used primarily for consumption in mature and developed markets,” Gartner analyst Mikako Kitagawa wrote in a statement attached to the July report. “In emerging markets, inexpensive tablets have become the first computing device for many people, who at best are deferring the purchase of a PC.”

In Western businesses, tablets are treated as add-ons rather than replacements for PCs, according to most analyst reports. Even in the most PC-centric organization, however, little of any growth in IT spending is going to traditional form factors.

The 2 percent growth IDC expects in Europe, for example, is made up almost entirely of smartphones and tablets. Remove those from the mix and IT spending in Europe is on course for a decline of 0.4 percent this year.

Subtracting the sale of smartphones and tablets drops the growth in IT spending worldwide to just 1.5 percent, in fact, compared to IDC’s earlier estimate of 2.6 percent. Spending on smartphones is projected to grow by 18.5 percent, while sales of tablets are on track to grow by 39 percent.

U.S. spending growth, currently pegged at 3.2 percent, drops to just 0.2 percent for 2013 after removing sales of smartphones and tablets.

In January, Forrester predicted that increasing stability in China’s political leadership would help boost IT spending by 8.6 percent, to more than $114 billion in 2013. Even 8.6 percent was a drop from an earlier projection of 11 percent—the same rate of growth in IT spending China showed in 2011 and 2012.

During 2012, a “once-in-a-decade” change in top leadership paralyzed China’s economic policy, slowing growth. “With the new Politburo standing committee, which governs China, in place, there is a reasonably good chance that China will tackle the factors like corruption, over-dominance of state-owned enterprises, and insufficient consumer demand that have inhibited stronger growth,” according to Forrester’s January report.

The Chinese economy failed to bounce back that quickly, however, as Chinese consumers lacking confidence in the new economy kept spending to a minimum. Chinese authorities have pledged to boost the country’s economy with more spending on physical infrastructure and more investment in manufacturing for the domestic market.

Outside of China, the reductions in IT spending could have wide-ranging implications for businesses and IT managers everywhere. It’s the same old story: less spending on IT means that administrators, CIOs and others will need to do more than less—including inside the datacenter, where the software and hardware needs to keep up with demand, whether or not IT budgets are reduced.


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