Advanced Computing in the Age of AI | Saturday, February 24, 2024

Despite Uncertainty, Cloud Drives IT Spending 

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Global IT spending is forecast to increase by 2.7 percent in 2017, a modest increase that might be higher if not for "political uncertainty in global markets," according to a new Gartner Inc. forecast that also predicts strong annual server sales driven by cloud rollouts.

Garter (NYSE: IT) reported Thursday (Jan. 12) that worldwide IT spending projected to total $3.46 trillion this year would rebound based on the convergence of cloud infrastructure with emerging digital technologies. These include artificial intelligence and blockchain-based crypto-currency.

Despite pent-up demand, that market analyst notes that "political uncertainty in global markets has fostered a wait-and-see approach causing many businesses to forestall IT investments." That's a reference to the incoming Trump administration, which is generating market uncertainties despite recent gains on world financial markets.

"The result of that uncertainty is a division between individuals and corporations that will spend more—due to opportunities arising—and those that will retract or pause IT spending," added Gartner's John-David Lovelock.

An example of those "opportunities arising" is the aggressive build out of cloud infrastructure by market leaders Amazon Web Services (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOGL). Heated competition in the public cloud sector as each vendor seeks to differentiate its services is projected to push global server sales to a 5.6 percent annual growth rate in 2017.

Gartner said the public cloud push prompted it to revise upward its global server forecast by a hefty 3 percent over the previous quarter. The upshot is that strong global server sales will offset expected declines in controller-based storage. Hence, Gartner forecast that datacenter spending would increase by about 2.6 percent this year after declining 0.6 percent in 2016.

Meanwhile, the enterprise software market continues to boom as more vendors offer distributions of open source code ranging from OpenStack cloud infrastructure to Linux application containers. Garter is forecasting that enterprise software investment, the fastest growing segment of its IT spending forecast, would reach $355 billion in 2017, a 6.8-percent growth rate. The growth rate for software spending is expected to hold up through 2018, the market watcher said.

Earlier this week, another market researcher forecast that the OpenStack market would grow at a 35-percent clip through 2020 to about $5.8 billion. Meanwhile, 451 Research predicted that the nascent application container market reached $762 million in 2016. It is forecasting a 40-percent growth rate over the next four years to $2.7 billion.

While those totals remain a small slice of the overall enterprise software market, they also represented one of its fast-growing segments as enterprises embrace distributed applications and other agile micro-services.

Further out, Gartner is forecasting that overall IT spending could reach $3.55 trillion in 2018, or roughly the same growth rate as projected for this year. That steadying of IT investments reflects the prospect that rapid innovation in areas such as cloud infrastructure could outweigh continuing geopolitical uncertainty.

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).