IT Spending Expected to Accelerate Next Year, After Emerging Markets Slowdown in 2013

According to the new International Data Corporation (IDC) Worldwide Black Book just released, worldwide IT spending is expected to accelerate next year after dipping to its slowest pace of growth since the financial crisis in 2013. Overall tech spending is on course to increase by 4% this year at constant currency, reaching $2.04 trillion, down from last year’s growth of 5% due mainly to the slowdown in key emerging markets including China and Russia. IDC forecasts that in 2014, a rebound in China and continued momentum in the US and Europe will see a return to overall industry growth of more than 5% (reaching $2.14 trillion).

Smartphones Still Driving Growth, but Infrastructure Set for Recovery

In fact, almost half of this year’s industry growth is due to continued strength in smartphone and tablet shipments. Excluding mobile phones, IT spending will increase by only 2.6% this year at constant currency (just 0.7% in US dollar terms, based on year-to-date exchange rates). Enterprise IT spending in many regions has been tepid since last year, with weaker spending on PCs, servers and storage than previously expected. Tentative signs of stability in commercial PC shipments during Q3, however, may foreshadow the gradual recovery in enterprise infrastructure investment which we expect to unfold in the next 12-18 months as a broad-based capital spending cycle kicks into gear. Spending on servers, storage and enterprise networks will increase by just 1% in 2013 before accelerating to growth of 4% next year.

US Market Is Resilient, Despite Politics

While the US is on course to post IT spending growth of 5% this year, this translates into just 3% excluding mobile phones. Enterprise spending in the US has been relatively resilient, given the ongoing political volatility, but spending on PCs and servers will decline this year while storage investment is flat. Both the storage and server markets in the US are expected to improve in 2014, but PC spending is likely to remain weak in spite of signs of stability in Q3 as tablet cannibalization continues at lower price points.

Europe and Japan Have Stabilized

Market conditions are gradually improving in Western Europe, where overall IT spending is on course for growth of 2% this year (1% excluding phones), and where economic momentum has taken a turn for the better in many countries. We assume that this gradual recovery will continue next year, translating into IT spending growth of 3% driven mainly by strengthening sales of commercial software. This year has also seen a moderate improvement in Japan, driven by the government’s short-term policy initiatives; while IT spending is on course to be flat in 2013 (0% growth), this marks an improvement from our previous forecast of a 1% decline.

China Will Rebound in 2014

IDC forecasts that IT demand will accelerate in China next year, in line with our expectation that macroeconomic growth and business confidence will improve. In China, overall IT spending is on course to increase by just 8% this year, the weakest pace of growth since 2008; next year, we forecast an acceleration of growth to 14% led by strengthening sales of PCs, servers, storage, software and IT services. Growth in India will remain broadly strong, driven mainly by smartphones and tablets, but we expect a slowdown in PC sales after state-level government initiatives helped to drive strong growth in 2013, while there are also signs of weakening growth in other sectors. A gradual deceleration in tech spending is also emerging in Brazil, while in Russia the economic slowdown has driven overall industry growth to just 1% this year (from 15% in 2012). We forecast a rebound in Russia to 10% growth next year, driven by smartphones, software and services.

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