IT spending to surpass US$3.4trn this year

19 Aug 2008

Despite a steady wave of global economic tremors, Gartner is predicting that IT spending worldwide will exceed US$3.4trn this year, up 4.5pc in constant currency terms.

Much of this growth will be driven by the decline of the US dollar as well as a shift from company-owned hardware to pay-per-use services, said Jim Tully, vice-president at Gartner.

“The US-led economic downturn shows no sign of causing a recession in IT spending,” Tully explained. “In subsequent years we will see reduced growth, but the fundamentals remain strong. Emerging regions, replacement of obsolete systems and some technology shifts are driving growth.

“Organisations are switching from company-owned hardware and software assets to per-use service-based models. This will impact the industry in various ways.

“The projected shift to cloud computing, for example, will result in dramatic growth in IT products in some areas and in significant reductions in others. In general, assets will be used with greater efficiency, and we are assuming the overall effect on market growth will be neutral. We also recognise that there is considerable upside potential for higher growth,” he said.

Software spending is on track for the strongest growth rate in 2008 at 13pc to US$178bn, followed by IT services spending growing at 9.4pc to reach US$748bn.

Computing hardware is set to grow 10pc in 2008 to reach US$382bn worldwide.

“Most companies updated their software systems during the period 1997 through 2001, so we are in the middle of an upgrade cycle that should extend past the end of this decade,” said Joanne Correia, managing vice-president at Gartner.

“However, the replacement of systems does not automatically equate to new software market growth. Software as a Service (SaaS)/cloud computing, service oriented architecture (SOA)/Web 2.0, and open-source software are causing huge changes to the software market. Many of these factors are impacting market growth as enterprises replace assets with per-use services.”

IT spending is dominated by services rather than products. Together, IT services and telecom services account for 70pc of total IT market spending. Gartner said the telecom sector has a major effect on overall IT market performance, accounting for almost US$2trn in 2008.

“Legacy telecom services have a dampening effect on sector growth, and therefore on the overall IT market,” said William Hahn, principal research analyst at Gartner.

“The dominant size of the telecom services market guarantees that even with the forecast for relatively slow growth, it will still comprise over 44pc of the IT market in five years’ time.”

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years