Lower-cost data centre options and cloud services dampening short-term IT spending

By July 22, 2014
IT costs

Spending on IT products and services worldwide is seeing only modest growth in 2014, partly due to the emergence of low-cost Cloud service options, with some segments showing more dynamism than others, says Gartner.

According to the latest projections from US-based information technology research and advisory firm Gartner, worldwide IT expenditure is set to total $3,700 billion for 2014, an increase of 2.1% over the year. This predicts a slower pace than its earlier forecast of 3.2% growth.  Gartner explains that the slowing rate of growth in IT spending – now being put at just 0.4% up on 2013 – is mainly due to companies opting for lower-cost solutions in data centre spending and in telecommunication services, where a 0.7% rise is now expected. This is at least in part due to the emergence of new business models and alternatives to existing IT systems. However, Gartner’s Managing Vice President Richard Gordon said in a statement that he expects to see a return to what he calls “normal spending growth” from 2015 to 2018 in all IT segments.

Software suppliers the major winners

Gartner’s latest figures show enterprise software sales totalling $321 billion for 2014, at +7% the highest growth rate versus 2013 among IT segments. This higher-than-expected rise stems from the ‘big data’ phenomenon and the consequent digital initiatives taken by companies and governmental organisations. It is the adoption of database management systems (DBMS) that is having a strong impact on growth in this area of the software market.  Meanwhile IT services are also feeling pressure and spending in this segment is forecast to reach a total of $967 billion this year, an increase of 3.8% for calendar 2014. Public Cloud services in particular are dampening the overall spend as they ‘cannibalise’ traditional data centre services, including implementation services.  Company IT buyers and investors currently appear more interested in smaller-scale projects, prioritising improvements that they are confident can be achieved fairly quickly rather than looking for new growth areas.

The impact of low-cost options and Cloud services

Following a fairly static 2014, DBMS are expected to rebound and post 2.9% growth in 2015. By contrast, expenditure on data centres is expected to come in at a modest $140 billion worldwide, as low-cost platforms have emerged and are attracting customers. The server market has also been impacted by more attractive service offerings via the Cloud. These low-cost Cloud alternatives have really eaten into telecoms operators’ revenues, and Gartner predicts that telecom spending will total $1,635 trillion for calendar 2014, up just 0.7% on last year. This is mainly due to client companies making less use of messaging and voice services and turning more and more to over-the-top (OTT) service providers. Average revenue per user in the telecoms segment is therefore expected to drop 10% annually till 2018.


Legal mentions © L’Atelier BNP Paribas