Global IT spending to face Chinese slow down this year: IDC

IDC on Monday said the global IT spending will slow down this year from the earlier predicted 4.9 percent to 4.6 percent. Weak business in China is the main reason.

In 2012, IT spending rose 6 percent. ( IT spending to grow 4.9% this year against 5.6% recorded in 2012: IDC )

Despite the lower forecast, IT spending will reach $2 trillion for the first time ever in 2013.

Meanwhile, total ICT spending, including telecommunications services, will increase 3.8 percent to $3.6 trillion.

IDC says PC sales face pressure from lower-cost tablets in the first half of 2013 and the rapid adoption of cloud services is cannibalizing revenue from traditional sales of software and IT services.

In the U.S., shipments of smartphones and tablets have buoyed the overall market so far this year, but forecasts have been lowered for other hardware market sectors and IT services.

Expectations have also been scaled back in Canada, Western Europe, Brazil, and Central and Eastern Europe, Middle East and Africa (CEMA) as well as in Asia/Pacific (excluding Japan).

IT spending in Europe will grow by 2 percent driven entirely by mobile devices.

Excluding phones and tablets, IT spending in Western Europe will decline 0.4 percent this year.

According to IDC, more than half of IT market growth will come from mobile devices. Excluding phones and tablets, IT spending will increase 1.7 percent, down from the previous forecast of 2.6 percent growth.

Worldwide spending on smartphones is expected to increase 18.5 percent this year, up from the previous forecast of 17.2 percent. Tablet spending will increase by 39 percent, up from the previous forecast of 32.5 percent.

Weaker Growth for U.S. Vendors

Exchange rate fluctuation continues to negatively impact the reported earnings of U.S.-based IT vendors.

Based on year-to-date exchange rates, IT spending is set to increase by just 3.2 percent in U.S. dollars. Excluding mobile devices, U.S. dollar growth will be flat at 0.2 percent.

PC Forecast Revised Down Again

The PC market, in particular, performed poorly in the first half of 2013 as cannibalization from tablets continues.

The economic slowdown in China, reverberating throughout Asia/Pacific, also took a bite from PC revenues; worldwide PC spending is now expected to decline by 7.2 percent in 2013, down from the previous forecast of a 2.6 percent decline.

Only the U.S. bucked this trend somewhat, with PC sales a little stronger than expected in the second quarter, but not enough to offset the overall decline in shipments and average prices.

Cooling Phase for Hardware

Server spending is expected to decline 3.5 percent in 2013 while storage hardware revenues will increase by 1.9 percent, down from 6.5 percent growth in 2012, and down from the previous forecast of 2.4 percent.

Average price declines in server and storage markets will pressure margins and revenues.

There are still pockets of growth, but overall hardware investments are in a cooling phase, which will last until 2014 at the earliest.

Software Sales Stable; Cloud Cannibalizing Services

IT services expectations have been impacted by economic weakness in some regions and continuing cannibalization from cloud services.

IDC has lowered the forecast for U.S. IT Services growth in 2013 from 3.7 percent to 2.9 percent, and worldwide services growth is now expected to be 3.4 percent, (down from the previous forecast of 3.8 percent in constant currency).

Software spending (including software as a service or SaaS) has remained relatively resilient overall, with growth of 5.5 percent still expected this year. By the end of 2013, 10 percent of annual software spending will have moved to the cloud.

Enterprises are investing in new software tools and solutions, especially where rapid cost-benefits have been identified, but more software sales are migrating to SaaS and PaaS delivery models.

China and Asia/Pacific Slowdown

The slowdown in the Chinese economy was a drag on IT spending in the first half of this year. IT spending will grow 9.5 percent in China this year, down from previous forecast of 12.9 percent growth.

IT spending in Japan will decline by almost 1 percent this year in constant currency.

For the overall Asia Pacific region, IT spending is now expected to increase by just 4.8 percent in constant currency this year, down from the previous forecast of 6.3 percent.

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