Enterprise Migration to the Cloud Causes Server Market Slowdown

Gartner has revised its Worldwide IT Spending Forecast downward to reflect the status of the American dollar and significant shifts in the market’s dynamics.

IT spending is anticipated to reach $3.46 trillion in 2017, a 1.4 percent increase. Previously, the research firm predicted that spending would rise 2.7 percent. Part of the reason Gartner amended its forecast involves the strength of the U.S. dollar.

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“The strong U.S. dollar has cut $67 billion out of our 2017 IT spending forecast,” said John-David Lovelock, research vice president at Gartner, in a statement. And as it turns out, many technology giants call the U.S. their home.

“We expect these currency headwinds to be a drag on earnings of U.S.-based multinational IT vendors through 2017,” Lovelock continued.

Data center IT equipment vendors will experience a slight rebound in 2017 (0.3 percent) after negative growth last year. Challenges remain for server makers as businesses increasingly look to the cloud for compute resources, however.

“We are seeing a shift in who is buying servers and who they are buying them from. Enterprises are moving away from buying servers from the traditional vendors and instead renting server power in the cloud from companies such as Amazon, Google and Microsoft,” stated Lovelock. “This has created a reduction in spending on servers which is impacting the overall data center system segment.”

All told, the data center systems segment will attract $171 billion in revenue, predicted Gartner.

The biggest winners this year will be the enterprise software and IT services segments, with gains of 5.5 percent and 2.3 percent, respectively. Enterprise software revenue is poised to reach $351 billion while IT services providers will generate $917 billion in sales.

The devices segment, buoyed by strong mobile phone sales and modest gains for PC, tablets and printer makers, will hit $645 billion in revenue this year, a 1.7-percent gain. Gartner recently forecast that the mobile phone market will approach the $400 billion mark as buyers flock to Samsung’s new premium phone, the Galaxy S8, and Apple’s 10th anniversary iPhone later this year. In emerging markets, buyers are leaving their basic phones behind, opting for higher-quality devices from vendors like Huawei and Oppo.

Finally, the communications services segment is expected to shed 0.3 percentage points in 2017, reaching $1.376 billion.

Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.

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