Uncertainties surrounding the prospects for an upturn in global economic growth remain the major retardants of IT growth. Although the U.S. did avoid the fiscal cliff, the subsequent sequestration, compounded by the rise of Cyprus’ debt burden, seems to have netted out any benefit, and the fragile business and consumer sentiment in evidence throughout much of the world continues. However, the new shocks are expected to be short-lived, and while they may cause some pauses in discretionary spending along the way, strategic IT initiatives will continue. In our 1Q13 update to the IT spending forecast, We look for modestly accelerated spending growth of 4.1% in 2013, up from 2.1% in 2012.
The current strength in the devices market was the biggest surprise in this quarter’s update. Here our spending estimates for mobile phones in 2012 have been increased to reflect higher average selling prices (ASPs), commanded by the likes of the popular Apple iPhone and Samsung Galaxy devices at the premium end of the market. We expect this effect to continue into 2013, but longer term, as competition in mature markets intensifies and the contribution to growth from emerging markets increases, spending growth on mobile phones will be hampered by lower ASPs. This short-term fillip to spending on mobile phones has driven an upward revision in device sector growth for 2013 from 6.3% last quarter to 7.9% now, despite flat spending on PCs and a modest decline in spending on printers.
Beyond 2013, our forecast for spending growth now includes 2017. Growth is expected to average a compound annual rate of 3.9% from 2012 through 2017. There are two things going on here.
First, we have the current economic cycle. Since the financial crisis of 2008 / 2009 the global economy has struggled to recover from recession, which has held back business investment and dampened consumer confidence and discretionary spending. We are only now seeing more positive indicators from the important US economy while the Eurozone continues to lurch from crisis to crisis. While there is a sense that a more stable economic outlook is around the corner, until there is a more sustained period of strengthening economic growth it is no surprise that IT spending growth is set to remain modest.
Second we are observing a slowdown in the long-term IT market growth rate as the industry matures; the high-growth phase of the past three decades, which was built on automation and productivity improvement, has come to an end and we won’t see a sustained return to double-digit annual growth in IT spending. Instead, within the context of overall modest growth in top-line IT spending, we’ll see a targeting of IT investment toward strategically important business objectives based on The Nexus of Forces.
The Nexus of Forces — social, mobile, cloud and information — are reshaping spending patterns across all of the IT sectors that Gartner forecasts. Consumers and enterprises will continue to purchase a mix of IT products and services; nothing is going away completely. However, the nature of this mix is changing dramatically and there are clear winners and losers over the next three to five years, as we see more of a transition from PCs to mobile phones, from servers to storage, from licensed software to cloud, or the shift in voice and data connections from fixed to mobile.
IT Spending Forecast, 1Q13 Update: The Nexus of Forces Effect on Spending