Cloud to boost ICT spending to grow 3% to $3.5 trillion in 2017

Cellular for IoTInformation and communications technology (ICT) spending in 89 countries will increase 3 percent this year in constant currency terms to $3.5 trillion.

Last year, ICT spending rose 2 percent.

Slow growth of 2 percent last year represented a significant slowdown from 5-6 percent IT spending growth recorded from 2012-2015. Slowdown in enterprise capital spending, weak consumer upgrades of PCs, phones, and tablets, and sluggishness in IT services were the reasons for poor growth in IT spending in 2016.

The 3 percent increase in ICT spending in 2017 is mainly due to improvements in emerging markets and a general pickup in infrastructure spending.

IT spending (excluding telecommunications) will also grow by 3 percent this year.

Cloud will drive much of the ICT spending, as more businesses move to adopt cloud services. This will continue to drive hardware spending by cloud service providers (CSPs), though the next major upgrade cycle will not begin until later in 2017.

Infrastructure-as-a-service (IaaS) spending will increase by 40 percent this year, accounting for an ever-increasing share of enterprise infrastructure budgets.

“Cloud drives capital spending cycles for hardware manufacturers and represents an increasing proportion of the customer base for server and storage vendors,” said Stephen Minton, program vice president in IDC’ Customer Insights & Analysis group.

Software-as-a-service (SaaS) and platform-as-a-service (PaaS) already account for almost 20 percent of all software spending and rising, while cloud adoption is also driving increasing usage of telecom services and investment in network equipment.

IDC said the forecast for 2017 is partly driven by economic cycles, including Brexit and the recovery in emerging markets. Brexit will have some effect on IT projects during the next 2-3 years as the UK begins the precarious process of negotiating its exit from the European Union.

IT spending in the UK will grow 1 percent in 2017 against 6 percent in 2016 due to weaker infrastructure and IT services spending. The rest of Europe remains similarly fragile, and weak consumer spending will drag on growth in many European countries during this period of uncertainty.

IDC noted downside risks in relation to the U.S., Japan, and China.

IT spending growth in China is expected to slow to 5 percent this year from 9 percent in 2016, and will decelerate in the next 2-3 years as the economy goes through a period of transition and restructuring.

Other key emerging markets are expected to show improving growth in 2017, including Brazil and Russia where technology spending was severely affected by economic downturn last year.

IT spending in Brazil will rebound from a 4 percent decline in 2016 to growth of 7 percent in 2017.

IT spending in Russia will post a decline for the overall market, but this is mainly linked to weak sales of smartphones and PCs.

Spending on enterprise infrastructure will rebound from a 5 percent decline last year to growth of 3 percent in 2017 before returning to double-digit growth in 2018, assuming the economic turnaround in Russia remains on track.

IT spending in India will achieve double digit growth in 2017 — bouncing back from a weak finish to 2016. Demonetization issues had a negative effect on tech spending in the fourth quarter.

The next wave of IT spending opportunities increasingly lie beyond the BRICs, in emerging markets across Africa, the Middle East, Eastern Europe and Latin America.