Combination of economic and political factors to cause slowed IT spending
The Gartner IT spending forecast for 2019 isn’t rosy. A combination of a strengthening U.S. dollar, economic uncertainty, political tensions, and trade wars will conspire to slow IT spending to 1.1% this year — the slowest rate of growth since the economic recovery from the last recession in 2008.
The Lowdown: In its annual IT spending forecast, analyst firm Gartner said it expects total IT spending in 2019 to reach $3.79 trillion — barely up from the $3.75 trillion in 2018. Gartner says the trend of the U.S. dollar — the global reserve currency through which much of technology spending is conducted — will make the cost of components and finished goods higher. That high-value dollar, combined with political tensions and economic uncertainty, creates a recipe for low growth.
The Details: While the overall IT spending growth forecast is low, the individual technology segments are a mixed bag. Gartner expects spending on enterprise software, which includes cloud-based applications, to grow 7.1% this year. IT services — a combination of professional, managed, and cloud services — are expected to climb 3.5%.
On the downside, data center systems, including servers and networking gear, will decline 2.8%; PCs, tablets, and mobile devices will drop 1.9%. Communications services will remain nominally unchanged at -0.1%.
The Impact: Gartner believes the low growth is a reflection of shifting IT priorities among businesses as much as economic and political headwinds. As more businesses shift resources and workloads to cloud environments, spending is shifting away from legacy data center and endpoint hardware to subscription-based services. Gartner is advising product managers and resellers to carefully balance their portfolios to account for these shifting spending priorities.
The Buzz: “Currency headwinds fueled by the strengthening U.S. dollar have caused us to revise our 2019 IT spending forecast down from the previous quarter,” said John-David Lovelock, research vice president at Gartner. “Through the remainder of 2019, the U.S. dollar is expected to trend stronger, while enduring tremendous volatility due to uncertain economic and political environments and trade wars.”
Counterpoint: While Gartner is predicting a shallow year for IT spending in 2019, the long-range forecast for 2020 is much better. Gartner anticipates a rebound next year, with IT spending jumping 3.6% to $3.93 trillion. The biggest expected gains in 2020 are in enterprise software (8.2%), IT services (4.8%), and devices (3.5%).
Channelnomics Point of View: Spending forecast numbers are more like barometers than actual predictions. Actual spending figures often don’t align with forecasts, but forecasts are generally good at providing the direction of the market. Other indicators signal a weak year for IT spending as businesses grapple with uncertainty, catching up with previous investments, and making the right digital transformation decisions. Nevertheless, the channel seems somewhat insulated from these trends as channel chiefs and solution providers tell 2112 they anticipated double-digit growth in 2019.