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Tim Green

Uncertainty Slows IT Spending in 2017

by Tim Green | Dun & Bradstreet Editor

January 17, 2017 | No Comments »

If you’re in the enterprise software business or you provide information technology (IT) services, you should expect business to get better in 2017. If you sell computers or mobile phones, don’t hold your breath for growth.

That’s the message from a Gartner Group forecast issued after New Year’s. It predicts that overall IT spending will rise about 2.7% for the year. That’s down from a 3% growth rate the firm forecast in last year’s fourth quarter.

The difference? Gartner says that companies won’t commit to IT spending until they get an idea of how the politics of 2016 play out in 2017. The uncertainty stems from events such as the vote in the UK to leave the EU, the election of Donald Trump as president of the US, and the rejection of constitutional reforms in Italy backed by former Premier Matteo Renzi (he resigned after the vote).

Without interference from the political sphere, converging trends in cloud, blockchain, digital business, and artificial intelligence would fuel stronger IT spending, Gartner says. But IT buyers want a clearer picture of what 2017 holds before filling up their shopping carts.

Even at a slower rate of growth, the world will spend about $3.5 trillion on technology in 2017.

The big mover for IT spending in 2017 is enterprise software. Gartner expects companies to collectively spend $355 billion, a 6.8% increase, on software to help run their businesses more efficiently. IT services should bring in about $938 billion, a 4.7% increase.

An increase of just $5 billion in spending for data center systems, as predicted by Gartner, would give it a 2.6% increase in 2017. Within the data center category, Gartner expects that Amazon, Microsoft, Google, and other companies will continue to build out their cloud platforms, pushing server sales 5.6% higher in 2017.

In terms of dollars spent, the biggest IT market is communications services, which Gartner expects will consume $1.4 trillion in 2017, a 1.3% growth rate.

Gartner looks for flat spending on devices — PCs, tablets, ultramobiles (tablets, lightweight PCs, and PC/tablet convertibles), and mobile phones — in 2017. That’s not bad, compared to the 9% drop in device spending in 2016.

Looking ahead to 2018, Gartner says a replacement cycle for PCs, strong pricing, and increased functionality of premium ultramobiles should keep device spending steady. Emerging markets, where people use smartphones as their main computing devices and replace them more regularly than in mature markets, should also help the mobile phone market.

Expectations of a steady PC market should be good news for Lenovo, HP Inc., and Dell Technologies, the top three PC makers. In 2016 PC shipments dropped 5.7% from 2015, according to International Data Corp.

Lenovo and HP continued to fight for the top spot. Lenovo’s shipments fell 3%, but it held on as the market leader with a 21.3% share. A 1.3% increase in shipments helped HP to get to 20.9%. Dell had the strongest growth at 4.3% and increased its market share to 15.7% in 2016 from 14.2% in 2015.

Dell posted a strong fourth quarter with a gain of 11% from the 2016 fourth quarter, shipping more than 11 million units in a quarter for the first time since 2011.

Tim Green has covered business, technology and science at newspapers and in higher education. At Hoover’s he covers computers and telecommunications. Follow him on Twitter.

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Photo by Shawn O’Neil, used here under a Creative Commons license.

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