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Growing spend on data centre systems could be short-lived

18 Oct 18

IT spending is expected to continue churning forward this year and next.

Gartner has released its forecast, with total spending projected to come to US$3.8 trillion next year, an increase of 3.2 percent from the expected $3.7 trillion this year.

“While currency volatility and the potential for trade wars are still playing a part in the outlook for IT spending, it is the shift from ownership to service that is sending ripples through every segment of the forecast,” says Gartner research vice president John-David Lovelock.

“What this signals, for example, is more enterprise use of cloud services — instead of buying their own servers, they are turning to the cloud. As enterprises continue their digital transformation efforts, shifting to ‘pay for use’ will continue. This sets enterprises up to deal with the sustained and rapid change that underscores digital business.”

This year spending on data centre systems is expected to grow six percent, fuelled by a strong showing from the server market that saw growth of more than 10 percent last year and is set for a 5.7 percent growth this year.

However, Gartner expects that in 2019 servers will revert to a declining market and drop 1-3 percent every year for the next five years. Consequently, overall data centre systems spending will be impacted and will fall to 1.6 percent in 2019.

In other sectors, enterprise software spending is forecast to show the most growth in 2019 with a 8.3 percent rise. Software as a service (SaaS) is boosting growth in almost all of the software sectors, especially in customer relation management as enterprises focus more on providing better customer experiences.

Spending on software will increase six percent this year with cloud software by far and away the most buoyant, set to reach growth of more than 22 percent.

While core applications like ERM, CRM, and supply chain remain as the biggest pullers of dollars, given recent events security and privacy are rapidly catching up.

Gartner ran a survey recently of CIOs around the world, which found that 88 percent have deployed or are planning to deploy cybersecurity software and other technology over the next year.

Services continue to be a key driver for IT spending, with the IT services market expected to grow 4.7 percent in 2019 to reach the $1 trillion milestone.

A worldwide slowdown in economic prosperity has been on the cards for some time now, and Gartner expects this to begin having an effect on enterprises as they look to cut internal spending by optimising external spend for business services like consulting.

A recent Gartner study found 46 percent of organisations asserted that IT services and supplier consolidation was among their top three most effective cost optimisation methods.

In terms of devices (PCs, tablets, and mobile phones), the market is expected to grow 2.4 percent in 2019 and reach $706 billion. Demand for PCs in particular has been strong and is expected to be ongoing until 2020 in light of Windows 10 PC hardware upgrades.

“PCs, laptops and tablets have reached a new equilibrium state. These markets currently have stable demand from consumers and enterprises,” says Lovelock.

“Vendors have only subtle technology differentiation, which is pushing them to offer PC as a Service (PCaaS) in order to lock clients into multiyear recurring revenue streams and offer new bundles service options.”