WW IT Spending to Grow 4.6% in 2013 – IDC

IT spending will grow by 4.6% at constant currency this year, down from the previous forecast of 4.9% growth and a sharp deceleration from last year’s growth of almost 6%, according to estimates from IDC Corp.

Despite the lower forecast, IDC expects IT spending to reach $2 trillion for the first time ever in 2013. Meanwhile, total ICT spending, including telecommunications services, will increase by 3.8% at constant currency to $3.6 trillion.

Capital spending in China and other emerging markets shows signs of weakening from the rapid pace of expansion recorded since 2010. The report also shows that PC sales face continued pressure from lower-cost tablets in the first half of this year, and the rapid adoption of cloud services is cannibalizing revenue from traditional sales of software and IT services. In the US, 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 as well as in AsiaPac (excluding Japan).

More than half of this year’s IT market growth is expected to come from mobile devices. Excluding phones and tablets, IT spending will increase by just 1.7% in constant currency (down from the previous forecast of 2.6% growth). Worldwide spending on smartphones is now expected to increase by 18.5% this year (up from the previous forecast of 17.2%), while tablet spending will rise 39% (up from the previous forecast of 32.5%).

The study also shows that exchange rate fluctuation continues to negatively impact the reported earnings of US-based IT vendors. Based on year-to-date exchange rates, IT spending will grow by just 3.2% in US$. Excluding mobile devices, US dollar growth will be virtually flat at just 0.2%.

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 AsiaPac, also took a bite from PC revenues. Worldwide PC spending is now expected to decline by 7.2% in 2013, down from the previous forecast of a 2.6% decline. Only the US 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.

Growth continues to decline in other hardware sectors, with worldwide server spending now expected to decline by 3.5% in 2013 while storage hardware revenues will increase by just 1.9% (down from 6.5% growth in 2012, and down from the previous forecast of 2.4%).

The forecast for US IT services growth in 2013 has also been lowered from 3.7% to 2.9%, and worldwide services growth is now expected to be 3.4%, (down from the previous forecast of 3.8% in constant currency). Software spending (including software as a service or SaaS) has so far remained relatively resilient overall, with growth in constant currency of 5.5% still expected this year. By the end of 2013, almost 10% of annual software spending will have moved to the cloud.

The slowdown in the Chinese economy was a drag on IT spending in the first half of this year. IDC now forecasts overall IT spending growth of 9.5% in China this year (in constant currency), still slightly outpacing GDP but down from the previous forecast of 12.9% growth and a sharp deceleration from the pace of the past four years.

Meanwhile, the upturn in Japanese stock market confidence, driven by the new government’s deflation-busting policies, has yet to materialize in a major upturn in IT spending. IDC now expects overall IT spending in Japan to decline by almost 1%, after the post-earthquake stimulus recovery, which drove growth of almost 5% in 2012. For the overall AsiaPac region, IT spending is now expected to increase by just 4.8% in constant currency this year, down from the previous forecast of 6.3%.