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Telecom services spending continues to fall as the dollar rises

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© Flickr/cc-licence/Bob Mical

Global spending on IT equipment and services is projected to drop to $3.66 trillion in 2015, a 1.3 per cent decrease from 2014, according to a new forecast by research firm Gartner, which blames the rising dollar as being chiefly responsible for the slowdown. Telecom services spending will account for the largest decrease across the five different segments, falling 2.6 per cent to $1.57 trillion this year.

This appears to be quite a turnaround, given that only last quarter Gartner was forecasting 2.4 per cent growth for the year. But the problem, explains the firm, has more to do with currency values than trading conditions.

“This is not a crash, even if it looks like one,” explained John-David Lovelock, research VP at Gartner. “The recent rapid rise in the value of the US dollar against most currencies has put a currency shock into the global IT market.”

In fact, if you factor out the impact of exchange rate movements, the corresponding constant-currency growth figure is even higher than the previous prediction of 2.4 per cent, at 3.1 per cent growth for the year. Such is the power and impact of the US dollar.

But before the industry becomes too complacent, Gartner warns that this focus on currency impact actually masks a bigger issue that has real implications for operators and vendors.

“Every product or service that has a US dollar-based component must have those costs covered at the lower exchange rate,” said Lovelock. “The simple implication is that there will be price rises. However, there are many other market forces at work – protecting US dollar profits will require a nuanced and multifaceted approach involving pricing, partners and product management."

Breaking down the research into its five component categories, Gartner predicts that growth in spending on telecom services will shrink by 2.6 per cent in 2015, to total $1.57 trillion. Among the more prominent changes affecting this drop were reductions in total connections for developed markets such as the US and several Western European countries, as growth in data-only connected devices and multi-SIM connections were not as high as previously expected.

Moving on to devices (including PCs, ultramobiles, mobile phones, tablets and printers), 2015 growth is forecast to decline 1.2 per cent to $685 billion, partly due to a slowdown in PC purchases in Western Europe, Russia and Japan. However, the mobile phone market is not as affected by the currency shifts, and change in the product mix in emerging markets toward lower-priced smartphones will negate price increases of premium phones, resulting in flat phone average selling prices between 2014 and 2015.

For the remaining three categories, data centre system spending is projected to reach $142 billion in 2015, an increase of 0.4 per cent from 2014. Spending in the enterprise software market will increase by 2.3 per cent to reach $320 billion in 2015, but the move towards subscription-based software (such as Office365) will result in significantly lower revenue growth than for the on-premises model. And finally IT services spending will fall 0.7 per cent to $942 billion in 2015.

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