Advanced Computing in the Age of AI | Thursday, April 15, 2021

Cloud Shift, Strong Dollar Slow IT Revenues 

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Global IT spending faces "headwinds" that include a rising U.S. dollar and a continuing slowdown in the server market as potential customers flock to the cloud. All this is reflected in anemic forecast for datacenter and over IT spending by market analyst Gartner Inc.

In its quarterly forecast, Garter (NYSE: IT) pegged global IT spending at $3.46 billion this year, a 1.4 percent increase over last year. That total was halved due in part to a strong U.S. dollar, making exports more expensive in global markets.

Meanwhile, as more customers obtain server space from cloud vendors rather than purchasing their own, server sales continue to slide, dragging with them overall datacenter spending. Gartner's quarterly forecast for datacenter spending reentered positive territory, but only 0.3 percent jump in spending over 2016.

Enterprise software remains the most robust IT sector, with annual spending expected to jump 5.5 percent this year to $351 billion. That total is more than double the projected spending forecast for datacenter systems. Meanwhile, software spending is projected to jump by 7.1 percent in 2018, Gartner said Monday (April 10).

The market analyst reckons a strong U.S. dollar will subtract about $67 billion from global IT spending this year, dragging down earnings for U.S.-based IT vendors.

Server vendors are suffering a double whammy: currency fluctuations and the steady enterprise shift to hybrid clouds: "Enterprises are moving away from buying servers from the traditional vendors and instead renting server power in the cloud from companies such as Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOGL) and Microsoft (NASDAQ: MSFT)," noted Gartner analyst John-David Lovelock. "This has created a reduction in spending on servers which is impacting the overall datacenter system segment."

The corresponding rise in enterprise software spending reflects the shift to virtualization of servers, storage, networking and other datacenter functions. Gartner reported in November that Cisco Systems was the only server vendor to report quarterly sales gains

Meanwhile, the rise of other infrastructure and platform services is propelling global IT services spending, which Gartner expects to grow 2.3 percent this year to $917 billion. While year-on-year sales growth for IT services is forecast to decline by more than a percentage point, the market researcher said it expects a rebound in 2018, with IT services growing at a 4.7-percent clip totaling $961 billion.

Communications services, which accounts for the biggest chunk of of global IT spending, are expected to remain relatively flat this year at about $1.376 trillion, down from about $1.38 in 2016. However, Gartner is forecasting a rebound in 2018 to nearly $1.4 billion in global spending for networking and other communication services.

Gartner analysts will review 2016 market share data and examine what it sees as a growing trend toward IT market concentration during a webinar scheduled for Tuesday (April 11).


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).

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