Tech Spending Still Strong Despite Cannibalization from Mobile Devices
Published on: 25th Feb 2013
Note -- this news article is more than a year old.
IT spending remained broadly strong throughout a difficult end to 2012 as business confidence waned in the shadow of the fiscal cliff economic growth declined in much of Europe and economies in Asia struggled to cope with reduced exports according to IDC In spite of these headwinds worldwide IT spending recorded annual growth of 5 9 percent in 2012 in constant currency terms keeping pace with the 5 8 percent growth recorded in 2011 Total IT spending on hardware software and IT services reached 2 trillion while ICT spending including telecom services increased by 4 8 percent to 3 6 trillion
Last year was difficult for U.S.-based IT suppliers, however, which were adversely affected by the strength of the dollar throughout most of the year. In U.S.-dollar terms, worldwide IT spending grew by just 3.3 percent. This marked a significant slowdown from the U.S. dollar growth rate of 9.5 percent recorded in 2011. In 2013, IT spending is expected to increase by 5.5 percent as businesses and consumers continue to invest in mobile devices, storage, networks and software applications.
While overall IT spending remained stable, 2012 was another difficult year for the PC industry, which recorded a 2 percent decline in annual revenues. Revenue declines were also recorded in servers, PC monitors and feature phones as cannibalization from tablets and smartphones continued to reshape the IT industry landscape. For the first time, spending on smartphones in 2012 exceeded PCs, reaching almost $300 billion, while PC spending declined to $233 billion.
"Cannibalization is happening across the industry," said Stephen Minton, Vice President in IDC's Global Technology and Industry Research Organization. "Smartphones have taken over from feature phones, tablet adoption is impacting PC spending, and the Cloud is affecting the traditional software, services and infrastructure markets. IT spending is still growing organically, but not at the same pace as prior to the financial crisis. Businesses are adopting IT solutions such as virtualization, automation and SaaS as a means to reduce the annual increases in their overall IT spending at a time when economic uncertainty remains high."
The global economy has been volatile through the past 12 months, and this sense of uncertainty persisted into the first quarter of 2013. IDC expects the U.S. economy to stabilize in the second half of the year, driving IT spending growth of 5.5 percent. 2013 will be another tough year for Europe, however, where tech spending is expected to increase by just 2 percent as the Eurozone and UK struggle to shrug off the lingering debt crisis. Excluding mobile devices, growth in Europe will be less than 1 percent. Japan has meanwhile lost most of the post-reconstruction momentum that drove IT spending to increase by 4 percent in 2012, and will record IT growth of 0 percent this year.
"This will be another tough year for mature economies," said Minton. "Weakness in Europe, as governments continue to impose austerity measures with a direct and indirect impact on IT spending, has also damaged the export-dependent Japanese economy. The U.S. should perform better, as long as politicians continue to reach 11th-hour deals to avert an economic crisis, and the PC market in the U.S. will at least stabilize after two successive years of major declines."
Emerging markets have also been volatile in the past 12 months, with weaker economic growth in Brazil, India, and China, creating uncertainty for IT vendors. Economic projections for 2013 are generally positive, however, and IDC believes that the government in China has enough ammunition to ensure an improvement in overall growth. With penetration rates still relatively low in many segments and industrial sectors within the BRICs and other key emerging markets, a stable economic outlook will translate into improving IT spending trends.
"We're more confident about China than we were in the middle of 2012, when PC shipments were slowing and there was a sense that the economy had slowed down more quickly than the government had planned," said Minton. "Underlying IT demand remained strong, despite the volatile capital spending patterns that mainly affected PCs, and total IT spending in China still increased by 16 percent last year, which was only slightly down compared to 17 percent growth in 2011. We expect more of the same in 2013, even in spite of the inevitable slowdown in some emerging technology adoption rates as those markets gradually mature."