Gartner lowers its IT spending forecast, but says activity remains high

The strong dollar and the move to cloud-based services are affecting buying choices

Dell PowerEdge servers sold well during the first quarter

Dell PowerEdge servers sold well during the first quarter

Worldwide IT spending is expected to decline by 5.5 percent this year, with enterprises benefitting from lower prices on communications and IT services but also having to pay higher hardware prices in some parts of the world.

Market research company Gartner revised its spending forecast downward on Tuesday: In April, it said IT spending in 2015 would decline 1.3 percent compared to last year.

But numbers can sometimes be deceptive; IT activity is stronger than the spending indicates, according to John-David Lovelock, research vice president at Gartner. Price declines in segments like communications and IT services, and the move to cloud-based services, mask an increase in activity, he said.

However, the strong dollar is resulting in price hikes on hardware, which is having a negative affect on spending.

For example, PC vendors selling to Europe and Japan, where local currencies have fallen since the start of the year, have little choice but to raise prices to preserve profits, according to Gartner. As a result, large organizations will keep their PCs longer rather than buy less expensive models or remove requirements for key features, Gartner said earlier this year.

Overall smartphone unit growth will start to flatten, as well. Things would have been worse if it weren't for sales of Apple's iPhones, especially in China.

IT departments that aren't dead-set on getting iPhones can benefit from the increasing power of mid-range Android-based smartphones: Buying high-end smartphones is no longer necessary to get performance that's good enough for most users.

In the datacenter, enterprises are also expected to defer upgrades as a means of offsetting price increases, according to Gartner. That development is offset by stronger-than-expected mainframe upgrades, as well as increased expectations for spending on hyperscale server infrastructures that power public and private clouds.

On the software side, increasing software-as-a-service (SaaS) competition is providing IT buyers with the upper hand. Vendors aren't likely to raise prices because SaaS is about market share, not profitability. Raising prices could take them out of a sales cycle, and these vendors don't believe they can afford to lose a client, according to Gartner.

All this means worldwide IT spending is now on pace to total US$3.5 trillion this year, the company said.

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