Will IT vendors increase prices to offset dollar fluctuations?

IT spending will decrease 5.5 percent in dollar terms and increase 2.5 percent in constant-currency in 2015 against 1.6 percent increase in 2014, said Gartner.

IT vendors do have to raise prices to protect costs and margins of their products, and enterprises and consumers will have to make new purchase decisions in light of the new prices,” said John-David Lovelock, research vice president at Gartner.

Recently, Salesforce.com, a top CRM supplier, increased the price of its new offerings.

All major IT segments that grew in 2014 will dip this year.

The spending on devices will decline 5.7 percent in 2015 after growing at 2.4 percent in 2014.

Data center systems spending will dip 3.8 percent against 1.8 percent growth last year.

Enterprise software spending will fall 1.2 percent as compared with 5.7 percent increase in 2014.

Spending on IT services will decrease 4.3 percent after clocking 1.9 percent increase last year.

Communication services will post 7.2 percent dip against 0.2 percent increase in 2014.

Gartner said the IT spending will dip 5.5 percent to $3.5 trillion in 2015 – primarily due to the rising U.S. dollar. In constant-currency terms, the market is projected to grow 2.5 percent.

In Gartner’s previous forecast in April, it had forecast IT spending to decline 1.3 percent in U.S. dollars and grow 3.1 percent in constant currency.
Worldwide IT Spending Forecast by Sector
Gartner said communications services will be the largest IT spending segment in 2015 with spending at nearly $1.5 trillion. This segment is experiencing the strongest decline among the five IT sectors. Price erosion and competitive threats are preventing revenue growth in proportion to increasing use within most national markets.

Mobile phones continue to be the leading segment in the device market, with growth in Apple phones, especially in China, keeping overall phone spending consistent. Smartphone unit growth will start to flatten. The PC and tablet market continues to weaken.

The expected 10 percent increase in average PC pricing in currency-impacted countries is going ahead, delaying purchases. Excessive PC inventory levels, especially in Western Europe, need to be cleared, which will delay Windows 10 inventory in the second half of the year.

Within the data center systems segment, storage and network markets are expected to see weaker growth. Enterprise budgets for data center systems in local spending are expected to remain stable for the year, with users expected to extend life cycles and defer replacements as a means of offsetting the price increases. The server market is benefiting from mainframe refresh cycle, as well as increased expectations for hyperscale spending.

Gartner said many software vendors will try not to raise prices because software as a service (SaaS) is about market share, not profitability. Raising prices could take software vendors out of a sales cycle, and these vendors don’t believe they can afford to lose a client.

Baburajan K
[email protected]

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