NZ IT spend to hit $11.4 billion, a slight decrease from 2014: Gartner

New Zealand IT spending is forecast to reach NZ$11.4 billion in 2015, a slight decrease of 0.8 percent from last year, reports Gartner in its latest Worldwide IT Spending Forecast.

Across the globe, Gartner forecasts IT spending to total US$3.5 trillion, a 5.5 percent decline from 2014.

Gartner attributes the decline to the rising US dollar. In constant-currency terms, the market is projected to grow 2.5 per cent. In Gartner’s previous forecast in April, it had forecast IT spending to decline 1.3 percent in U.S. dollars and grow 3.1 percent in constant currency.

“We want to stress that this is not a market crash. Such are the illusions that large swings in the value of the US dollar versus other currencies can create,” says John-David Lovelock, Gartner research vice president.

“However, there are secondary effects to the rising US dollar. Vendors do have to raise prices to protect costs and margins of their products, and enterprises and consumers will have to make new purchase decisions in light of the new prices.”

In New Zealand, Gartner says a decrease in spending on devices (PCs, tablets, printers and mobile phones) and communications services is behind the overall decline.

Australian IT spending, however, is forecast to reach almost A$78.1 billion in 2015, an increase of 2.1 percent from 2014.

IT services represents the largest spending category in Australia at A$28.8 billion, while software is the fasting growing area of spending, expected to grow 9.8 percent in 2015 to reach almost A$9.4 billion.

In the Asia Pacific region, IT spending is forecast to total US$743 billion this year, an increase of 0.7 percent from 2014. However, in constant-currency terms, the market is projected to grow 4.5 percent in 2015, revised downward by 0.5 percent from last quarter’s forecast.

Communications services will continue to be the largest IT spending segment this year, with spending at nearly $1.5 trillion, according to the report, which tracks major technology trends across the hardware, software, IT services and telecom markets..

Excessive PC inventory levels need to be cleared, which will delay Windows 10 inventory in the second half of the year. Gartner

However, this segment is also experiencing the strongest decline among the five IT sectors, notes Gartner. Price erosion and competitive threats are preventing revenue growth in proportion to increasing use within most national markets.

In the device market, mobile phones continue to be the leading segment, with growth in Apple phones, especially in China, keeping overall phone spending consistent.

However, overall smartphone unit growth will start to flatten. The PC and tablet market continues to weaken. The expected 10 per cent increase in average PC pricing in currency-impacted countries is going ahead, delaying purchases even more than expected. Excessive PC inventory levels, especially in Western Europe, need to be cleared, which will delay Windows 10 inventory in the second half of the year.

In the data centre systems segment, storage and network markets are both expected to see weaker growth in US dollar terms as a result of the appreciation of the US dollar, says Gartner.

Enterprise budgets for data centre systems in local spending are expected to remain stable for the year, with users expected to extend life cycles and defer replacements as a means of offsetting the price increases.

The overall near-term data centre weakness is slightly offset by a more positive outlook for the server market. The server market is benefiting from a stronger-than-expected mainframe refresh cycle, as well as increased expectations for hyperscale spending.

Enterprise software spending is forecast to decline 1.2 percent in 2015, with revenue totaling $654 billion. Gartner analysts said many software vendors will try not to raise prices because software as a service (SaaS) is about market share, not profitability. Raising prices could take software vendors out of a sales cycle, and these vendors don’t believe they can afford to lose a client.

IT services spending in 2015 is projected to decline 4.3 percent. Gartner expects modest increased spending on consulting until next year, as vendors have demonstrated their ability to stimulate new demand from buyers looking for help with navigating business and technology complexities, particularly related to building a digital business.

However, the forecast for implementation services has been slightly reduced.

Increasingly, buyers prefer solutions that minimise time and cost of implementation, driving demand for more-efficient delivery methods, out-of-the-box implementation, and lower-cost solutions, says Gartner.

“IT activity is stronger than the growth in spending indicates. Price declines in major markets like communications and IT services, and switching to ‘as a service’ delivery, mask the increase in activity,” concludes Havelock.

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