Australian IT spend to increase despite global decline

Australian IT spending for 2015 will increase 2.1 per cent from last year, reaching almost A$78.1 billion, despite an overall decline in worldwide IT spending, according Gartner forecasts.

The analyst firm’s latest Worldwide IT Spending Forecast has predicted global IT expenditure will total US$3.5 trillion in 2015, a 5.5 per cent decline from 2014, which analysts attribute to the falling US dollar. The entire Asia Pacific region is expected to see a 0.7 per cent increase in spending, reaching US$743 billion in 2015.

Australia’s largest spend for 2015 will be on IT services at A$28.8 billion, while software will be the fasting growing area of spending, expected to grow 9.8 per cent in 2015 to reach almost A$9.4 billion, Gartner has predicted.

Globally, all IT investment priorities are expected to remain the same, despite the fall in overall expenditure. Communications services were forecast to continue as the largest IT spending segment in 2015 with nearly US$1.5 trillion dedicated to this sector. However, communications is also expected to experience the strongest decline (7.2 per cent) due to price erosion and strong competition.

IT services will be the second largest segment in terms of IT spending, though investment is expected to drop 4.3 per cent. Gartner has predicted modest growth in consulting for 2015-2016, as vendors have demonstrated reliability with navigating business and technology complexities. However, the forecast for implementation services is set to slightly reduce, suggesting buyers prefer solutions that minimise time and cost of implementation.

Devices represented the third most popular field for investment but will see the second greatest spending decline (5.6 per cent), Gartner said.

Enterprise software will see a minor decline of 1.2 per cent, drawing over US$300 billion of global IT spend. Gartner has predicted many software vendors will try not to raise prices because software-as-a-service (SaaS) is about market share, not profitability, thus raising prices could take software vendors out of a sales cycle.

Lastly, data centre systems will see a 3.8 per cent decline, reaching just $136 billion globally, as enterprises are expected to extend life cycles and defer replacements as a means of offsetting the price increases.

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

“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,” said John-David Lovelock, research vice president at Gartner.

“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.

“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.”