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Business Impact of Managed Cloud Services

David H Deans

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Global IT Spending Outlook to Reach $3.8 Trillion in 2014

Top predictions for 2014 business technology investment include a focus on disruptions brought about by the Internet of Things

The top predictions for 2014 business technology investment, according to Gartner Inc., include a focus on disruptions brought about by digital business, the Internet of Things, smart machines and the onset of what they call the Digital Industrial Revolution.

That forward-looking view can be balanced by their current IT expense outlook. Worldwide IT spending is forecast to total $3.8 trillion in 2014 -- that's a 3.1 percent increase from 2013 spending of $3.7 trillion, according to the latest market study by Gartner.

In 2013, the traditional IT market experienced flat growth, growing 0.4 percent year over year.

Spending on devices contracted 1.2 percent in 2013, but it will grow 4.3 percent in 2014. Gartner analysts said convergence of the PC, ultramobiles (including tablets) and mobile phone segments -- as well as erosion of profit margins -- will take place as vendor differentiation will be based upon the price of a device.

Software Applications Investment Remains Constant
According to Gartner's assessment, enterprise software spending growth continues to be the strongest throughout the forecast period. The 2014 annual growth rate is expected to grow 6.8 percent.

"Investment is coming from exploiting analytics to make B2C processes more efficient and improve customer marketing efforts. Investment will also be aligned to B2B analytics, particularly in the SCM space, where annual spending is expected to grow 10.6 percent in 2014,” said Richard Gordon, managing vice president at Gartner.


Last quarter, Gartner's forecast for 2014 IT spending growth in U.S. dollars was 3.6 percent, a 0.5 percentage points higher than the current forecast.

"A downward revision of the 2014 forecast growth in spending for telecom services -- a segment that accounts for more than 40 percent of total IT spending -- from 1.9 percent to 1.2 percent is the main reason behind this overall IT spending growth reduction," said Mr. Gordon.

Exploring the Key Worldwide IT Market Drivers
A number of factors are involved, including the faster-than-expected growth of wireless-only households, declining voice rates in China and a more frugal usage pattern among European customers. The latter coincides in Western Europe with a breakout of fierce price competition among communications service providers to retain customers and attract new ones.

The data center systems spending growth outlook for 2014 has been cut from 2.9 percent in Gartner's previous forecast to 2.6 percent. They say that this is mainly due to a reduction in the forecast for external controller-based storage and enterprise communications applications.

Together, these segments represent 32 percent of total data center system end-user spending.

Moreover, Gartner has revised the IT services compound annual growth rate between 2012 and 2017. The largest contributor to this revision comes from reductions in IT outsourcing -- specifically, in colocation, hosting and data center outsourcing growth rates.

"We are seeing CIOs increasingly reconsidering data center build-out and instead planning faster-than-expected moves to cloud computing. Despite these small reductions, we continue to anticipate consistent four to five percent annual growth through 2017," said Mr. Gordon.

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David H. Deans is the Managing Director at the GeoActive Group. He has more than 25 years of experience in the Technology, Media and Telecom sectors.