IT spending in emerging markets hit by economic slowdown

Guy Daniels
By Guy Daniels

Feb 6, 2014

According to new research from IDC, IT spending will be inhibited by the economic slowdown in emerging markets in 2014, in addition to a deceleration in the growth of smartphones and tablets. Consequently, IDC has lowered its forecasts for IT market growth in Asia Pacific, China, Central and Eastern Europe, the Middle East and Africa, driving down its forecast for Worldwide IT spending growth to 4.6 per cent this year (down from the previous forecast of 5 per cent).

With currency devaluation and inflation likely to inhibit business confidence in many emerging economies in the first half of this year, and with the previously rapid growth of mobile devices having begun to inevitably slow from the pace of the past two to three years, overall industry growth will dip slightly from last year’s 4.8 per cent.

“What goes up, must come down, and emerging markets have been on the down slope since last year,” said Stephen Minton, VP of IDC’s Global Technology and Industry Research Organization (GTIRO). “The good news is that, at the same time, mature economies have stabilized significantly. The US seems to be heading in the right direction, and the worst of the crisis may be over in Europe. While growth in mature economies will still lag emerging markets in most cases, the balance of risks has shifted considerably.”

While overall industry growth has cooled, some areas of tech spending are increasing as businesses in mature economies begin to invest once again in overdue infrastructure upgrades and replacements. Spending on servers will increase by 3 per cent, after last year’s decline of 4 per cent, and storage spending will also grow by 3 per cent this year (following a 0.5 per cent decline in 2013). Enterprise software spending remains broadly strong, with growth still expected in the range of 6-7 per cent. Excluding mobile phones, IT spending growth will actually accelerate in 2014 from 2.9 per cent last year to 3.4 per cent this year.

“The inevitable slowdown in the explosive pace of smartphones and tablets is masking an underlying improvement in many areas of IT spending,” said Minton. “Businesses in mature economies are beginning to feel more confident about the economy compared to a year ago, and this is translating into new IT investments. There’s significant pent-up demand in the US and Europe for infrastructure upgrades, capacity and bandwidth investments, and overdue replacement cycles. Many businesses will choose to fix the roof while the sun is shining in 2014.”

Despite ongoing economic uncertainty, IDC believes that IT market fundamentals are more solid this year than 12 months ago. Enterprise enthusiasm for new software built around mobility, cloud, big data and social, remains strong. Consumer enthusiasm for mobile devices and applications remains positive, even though the market has inevitably cooled.

“At the end of 2013, we passed the $2 trillion mark in annual IT spending for the first time in history, and $1 trillion in hardware spending,” said Minton. “This year’s milestones will include $0.5 trillion in spending on mobile devices alone (phones and tablets), and more than $400 billion on Software.”

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