IDC predicts uncertainty in IT spending over Coronavirus
The International Data Centre (IDC), said worldwide IT spending will increase by five per cent this year, but with a few caveats. For one, the Coronavirus is front and centre this year, as businesses keep a tight grip on short-term investments. China was expected to post IT spending growth12 per cent this year, up from last four per cent last year, due in part to the U.S. trade deal.
According to IDC, the coronavirus looks likely to inhibit this growth to something less, “but it’s too early to quantify the impact on other regions. Risks are more weighted to the downside in the Asia-Pacific region, which is currently forecast to post a five per cent increase in IT spending growth this year. Pre-coronavirus, the United States’ IT spending growth was projected to be seven per cent this year, while Western Europe had a positive three per cent forecast.
Spending on software and services investments will remain stable this year, while smartphone sales are expected to recover on the back of wider 5G upgrades in the second half of 2020, according to IDC.
Minus Smartphones, IT spending will drop from seven per cent growth last year to four per cent this year. Software growth will be slightly down from 10 per cent in 2019, to less than nine per cent this year.
IDC said IT services would drop from four per cent last year to three per cent this year. PC sales are projected to decline by six per cent in 2020, compared to a growth rate of seven per cent in2019.
“Much of this year’s growth is dependent on a positive Smartphone cycle as the year progresses, but this is under threat from disruption caused by the coronavirus crisis,” said Programme Vice President in IDC’s Customer Insights &Analysis Group, Stephen Minton, in a statement.He added:” Our current forecast is for broadly stable tech spending in 2020, but PC sales will be way down on last year, while server/storage investments will not recover to the levels of growth seen in 2018, when hyper scale service providers were deploying new data centres at an aggressive pace.”
Last year hyper scale providers, such as Facebook, cut back on their CAPEX spend, which had a negative impact on vendors such as Arista Networks. In 2020, hyper scale service provider IT spending will bounce back to nine per cent growth, which would be up from three per cent last year but off of 2018’s pace.
Cloud infrastructure and digital service providers will continue to increase their IT budgets, to keep up with strong user demand for cloud and digital services.
“Much of the explosive growth in service provider spending from 2016 to 2018, was driven by aggressive rollout of servers and storage capacity, but more spend is now moving to software and other technologies, as these providers seek to drive into higher-margin solution markets including AI and IoT,” said Minton.
“Nevertheless, after infrastructure spending cooled last year, we expect service providers pending to be broadly stable and positive in the next few years, because these firms need to keep driving up capacity in order to deliver services to end-users,” he added.