Gartner: IT spending to drop due to falling equipment prices

For once, the trends are in the favor of customers as IT equipment gets cheaper.

IT spending drop due to falling prices, Gartner predicts
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Gartner has updated its forecasts for IT spending this year with a downward projection, but it's not necessarily due to declining sales. It’s because the strengthening U.S. dollar is driving prices down and undercutting previous predictions.

Overall spending is expected to increase by 1.1% over 2018, to $3.79 trillion, down from a prediction of 2.8% growth made in January.

“Currency headwinds fueled by the strengthening U.S. dollar have caused us to revise our 2019 IT spending forecast down from the previous quarter,” said John-David Lovelock, research vice president at Gartner, in a statement. “Through the remainder of 2019, the U.S. dollar is expected to trend stronger, while enduring tremendous volatility due to uncertain economic and political environments and trade wars."

Lovelock further said, “In 2019, technology product managers will have to get more strategic with their portfolio mix by balancing products and services that will post growth in 2019 with those larger markets that will trend flat to down. Successful product managers in 2020 will have had a long-term view to the changes made in 2019.”

The impact is pretty strong. Gartner sees the data center systems segment turning negative for the year. It had projected a 4.2% increase this year, but now it now says data center purchasing will decrease by 2.8% to $204 billion.

What's causing the drop in IT spending?

The decline in IT spending is due to the U.S. dollar driving lower average selling prices (ASPs) in the server market, along with price drops in component costs, Gartner said. In particular, the memory market is in a price freefall, so standard and NAND flash memory are a lot cheaper.

Another factor in the decline of prices is that servers are increasingly bought by cloud companies, which are more likely to buy cheaper original design manufacturer (ODM) equipment from companies such as Supermicro and Inspur.

Enterprise IT spending is expected to continue to shift from traditional on-premises offerings to the cloud, which will drive a 7.1% growth in the enterprise software market to $427 billion. Gartner expects increased growth for the infrastructure software segment to be a particular driver, especially with integration platform as a service (iPaaS) and application platform as a service (aPaaS).

Worldwide IT spending is projected to total $3.79 trillion in 2019, an increase of 1.1% from 2018, according to Gartner. So, no one in the enterprise IT space risks going out of business any time soon.

Copyright © 2019 IDG Communications, Inc.

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