Currency Shifts Erode IT Spending Forecast
The rapid and continuing rise of the U.S. dollar against most currencies will put a dent in global IT spending during 2015, a new forecast concludes.
Market researcher Gartner called the rapid and largely unexpected rise of the dollar a "currency shock" that would reduce worldwide IT spending by 1.3 percent this year to $3.66 trillion. The forecast reflects a steady rise in the dollar against the euro and other currencies, resulting in a downward revision in Gartner's quarterly forecast that previously called for 2.4 percent growth in IT spending this year.
The updated market analyst warned that continuing currency fluctuations mean IT vendors selling products and services based on the U.S. dollar "must have those costs covered at the lower exchange rate." The obvious solution is to raise prices, although Gartner counsels a "multifaceted approach" that also includes international partnerships and tighter "product management."
While most IT categories tracked by Garter will see declining growth in the current forecast, datacenter and enterprise software spending are expected to expand despite currency fluctuations. Software spending, for instance, is still expected to grow by a relatively healthy 2.3 percent as the virtualization of datacenters and other IT infrastructure continues to gain momentum. Gartner said it expects software spending to hit $320 million in 2015.
Currency fluctuations slow IT spending.
Likewise, spending on datacenter systems is expected to continue trending upward in the face of currency exchange headwinds, rising by 0.4 percent this year, according to the Gartner forecast.
Spending on all other IT categories tracked by Gartner—devices along with IT and telecom services—will be dragged down the rising U.S. dollar, the market analyst warned. Those categories also account for much larger segments of the estimated $3.6 trillion in annual IT spending.
While datacenter spending should remain roughly stable this year, Gartner noted that the server segment has seen the greatest impact from currency fluctuations. Growing pricing pressure is continuing to shrink server vendor margins at a time when new competitors like Lenovo are targeting the Asian market as a way to offset slowing U.S. and European markets.
Meanwhile, storage and network equipment spending have also been eroded by currency fluctuations, Gartner said.
While enterprise software continues to rise, Gartner said its quarterly forecast reflects a downward revision in overall software spending for this year. The red-hot open source software community and the growth of software-defined networks and cloud-based computing and storage are expected to propel the sector in 2015.
Still, telecom services account for between one-third and half of all global IT spending, and Gartner is forecasting a steep 2.6 percent decline to $1.57 trillion. Slowing demand is expected to be equally as important as currency fluctuations in the stagnant telecommunications market.
Setting aside volatility in the currency and energy markets, where declining oil prices could actually boost IT purchases, Gartner said its forecast closely tracks earlier IT spending forecasts. "Taking out the impact of exchange rate movements, the corresponding constant-currency growth figure is 3.1 per cent, only off 0.6 per cent from last quarter's update," noted John-David Lovelock, Gartner's research vice president.
