Gartner cuts 2014 IT spending growth forecast

Enterprise software revenue will see the most growth, at 6.9%; pricing pressure will lower revenue numbers, says Gartner

IT research firm Gartner has cut its forecast for global IT spending by about one-third for this year, blaming a tougher competitive environment and subsequent pressure on vendors to lower prices.

Spending will rise 2.1% to $3.7 trillion in 2014, down from the 3.2% growth rate Gartner had predicted for 2014.

The downgraded forecast isn't necessarily a cause for concern, said Gartner managing vice president Richard Gordon in an interview.

"In the context of an improving global economic situation, to have IT spending be anemic, in the low single digits, might be a surprise on the face of it," he said. But customers aren't necessarily cutting back on spending, Gordon said. "They're getting better deals for their money and spending their money carefully."

Data center system spending will be the slowest growing category in 2014, rising only 0.4% to $140 billion due to factors such as lower-cost storage options in the cloud and a move away from high-end server systems.

Devices spending will rise just 1.2% to $685 billion due to price cuts on mobile phones and tablets, Gartner said.

IT services revenue is expected to jump 3.8% this year to $967 billion after "weak vendor performance" in 2013, according to Gartner. Within this category, however, spending on IT outsourcing has been slowed by the ongoing price war between cloud storage vendors. Implementation services revenue is being constrained by customers choosing to conduct smaller projects.

Meanwhile, enterprise software revenue will rise 6.9% in 2014 to $321 billion, buoyed by stronger growth in infrastructure software sales but tempered by a slower rise in spending on applications, Gartner said.

The increase in connected devices in the so-called Internet of Things will help push software sales higher in coming years, Gordon said. "With IoT and digital business in general, you've got a lot more data out there that needs to be collected, stored and analyzed."

Finally, telecom services revenue will also see meager growth this year, rising 0.7% to $1.635 trillion. Average revenue per user for voice services is expected to decline 10% each year through 2018, again due to competitive pressures among carriers as well as emerging free or advertising-supported service offerings, Gartner said.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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