Enterprises Tap the Brakes on IT Spending in 2016

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According to a revised forecast from Gartner, worldwide IT spending will amount to $3.49 trillion in 2016, a 0.5 percent decline compared to last year when the market dropped 6 percent to $3.5 trillion. Last quarter, the analyst firm expected the market would grow 0.5 percent.

Wary of economic conditions, enterprises are optimizing their IT budgets, observed Gartner vice president John-David Lovelock. Meanwhile, CIOs and business leaders are picking up the pace of their digital transformation efforts.

“Business leaders know that they need to become digital businesses or face irrelevance in a digital world. To make that happen, leaders are engaging in tough cost optimization efforts in some areas to fund digital business in others.

“Typically, less than 10 percent of organizations are in cost optimization or cost cutting mode,” said Lovelock in a statement. “However, the need to spend on digital business initiatives in a time when revenue growth does not support runaway IT budgets is forcing more organizations to optimize as a first step.”

Cloud computing’s explosive growth is also having an effect on how enterprises budget for their IT needs.

“Most traditional IT now has a ‘digital service twin’ — license software has cloud software, servers have Infrastructure as a Service, and cellular voice has VoLTE [Voice over LTE],” said Lovelock. “Things that once had to be purchased as an asset can now be delivered as a service.”

This year, the devices segment – PCs, tablets, smartphones and the like – will be the hardest hit. Gartner predicts that spending on devices will fall 3.7 percent to $626 billion. Communication services will dip 2 percent to $1.4 trillion, chiefly due to economic challenges and slackening demand in three major markets, Brazil, China and Russia.

Enterprise software vendors have reason to cheer. Despite some speed bumps in the operating systems space, spending will reach $321 billion worldwide, a 4.2 percent gain.

“The operating system forecast has been downgraded, reflecting Gartner’s expectation for further delays in the adoption of Windows 10 and Windows Server 2016,” stated the research group. “However, it is the key emerging markets, particularly Latin America, which face escalating political and economic challenges that are responsible for the slow growth.”

Spending on both data center systems and IT services will jump 2.1 percent this year, reaching $175 billion and $929 billion, respectively. Maintaining their momentum from 2015, network equipment providers will be kept busy this year as businesses continue to upgrade their networks, said Gartner.

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