Framingham, Mass. − Worldwide IT spending in 2013 is expected to grow slightly less than initially forecast due to an economic slowdown in China, according to International Data Corp. (IDC). IT spending is forecast to grow 4.6 percent in constant currency in 2013, down from a previous forecast of 4.9 percent growth. This follows a growth rate of nearly 6 percent in 2012.
Although IDC lowered its forecast, the market research firm projects IT spending to reach $2 trillion for the first time in 2013. IDC's Worldwide Black Book Query Tool report also reveals that total ICT spending, including telecommunications services, will increase by 3.8 percent at constant currency to $3.6 trillion.
The IDC report finds that capital spending in China and other emerging markets shows signs of weakening from their accelerated pace of growth since 2010. Other issues include continued pressure on PC sales from lower cost tablets in the first half of 2013 and the rapid adoption of cloud services, which is impacting revenue from traditional sales of software and IT services.
On a positive note, smartphones and tablets have bolstered the overall IT market in the U.S. More than half of this year's IT market growth will come from mobile devices; excluding phones and tablets, with IT spending set to increase by 1.7 percent in constant currency (down from the previous forecast of 2.6 percent growth), according to IDC.
Worldwide spending on smartphones is expected to increase by 18.5 percent in constant currency this year (up from the previous forecast of 17.2 percent), while tablet spending will increase by 39 percent (up from the previous forecast of 32.5 percent).
However, IDC has lowered its forecasts for other hardware market sectors and IT services in the U.S. Growth expectations also have been cut in Canada, Western Europe, Brazil, and Central and Eastern Europe, Middle East and Africa (CEMA), and Asia/Pacific (excluding Japan).
For example, worldwide server spending is forecast to dip by 3.5 percent in 2013 while storage hardware revenues will increase slightly by 1.9 percent (down from 6.5 percent growth in 2012, and down from the previous forecast of 2.4 percent).
Also troubling for the IT sector is PC sales, which faces continued cannibalization from tablets. Worldwide PC spending is forecast to decrease by 7.2 percent in 2013, down from the previous forecast of a 2.6 percent decline. IDC reported that PC sales in the U.S. were a little stronger in the second quarter but not enough to offset the overall decline in shipments and average prices.
"With the economic outlook uncertain for the second half of this year, we remain focused on the downside risks associated with China and Western Europe," said Stephen Minton, vice president in IDC's Global Technology & Industry Research Organization (GTIRO), in a statement. "IT spending in Europe remains tepid by any historical standards, with overall growth of 2 percent driven entirely by mobile devices. Excluding phones and tablets, IT spending in Western Europe will in fact decline by 0.4 percent this year."
In addition, IDC reports that exchange rate fluctuation continue to negatively impact the earnings of U.S.-based IT vendors. Based on year-to-date exchange rates, IT spending will increase by 3.2 percent in U.S. dollars. If mobile devices are excluded, U.S. dollar growth will be virtually flat at 0.2 percent, indicating a major challenge by IT vendors that aren't competing in the mobile device sector.
"Enterprise IT suppliers, and U.S.-based vendors in particular, are experiencing a challenging year," stated Minton. "While mobile device sales continue to outpace expectations, the rest of the industry is experiencing weakening growth as the global economy faces up to a slowdown in China, which may yet spiral into a more severe downturn."
IDC forecasts overall IT spending growth of 9.5 percent in China in 2013 (in constant currency), which is still slightly outpacing GDP but down from the previous forecast of 12.9 percent growth. IT spending in the overall Asia Pacific region is now expected to increase by 4.8 percent in constant currency this year, down from the previous forecast of 6.3 percent.
IDC isn't the only market research firm to downgrade IT spending for this year. Gartner Inc. also recently downgraded its forecast for worldwide IT spending to a 2.1 percent increase from the previous forecast of 4.1 percent growth to reach $3.6 billion in 2013. The market research firm attributes the lowered forecast to recent fluctuations in the U.S. dollar exchange, and a decline in hardware device sales.
Gartner has revised its forecast for device spending in 2013 from 7.9 percent growth to 2.8 percent growth. PC sales continued to decline into the second quarter with little recovery expected in the second half of the year, according to Gartner. The 2013 outlook for tablet and mobile phone revenues is significantly greater with tablet revenue projected to grow by 38.9 percent and mobile phone revenue to increase by 9.3 percent.
"Exchange rate movements, and a reduction in our 2013 forecast for devices, account for the bulk of the downward revision of the 2013 growth," said Richard Gordon, managing vice president at Gartner, Stamford, Conn., in a statement. "Regionally, 2013 constant-currency spending growth in most regions has been lowered. However, Western Europe's constant-currency growth has been inched up slightly as strategic IT initiatives in the region will continue despite a poor economic outlook."