Data center systems takes hardest hit in revised IT spending forecast

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Uncertain political environments and the impact of global trade wars have caused Gartner, Inc. to revise downward its IT spending forecasts for 2019, with data center systems taking the largest hit.

According to the latest projections from the research firm, worldwide IT spending is now projected to total $3.79 trillion in 2019, an increase of only 1.1 percent from 2018.

The data center systems segment will experience the largest decline in 2019, with a decrease of 2.8 percent, Gartner predicts. This is mainly due to expected lower average selling prices (ASPs) in the server market driven by adjustments in the pattern of expected component costs.

“Currency headwinds fueled by the strengthening U.S. dollar have caused us to revise our 2019 IT spending forecast down from the previous quarter,” says John-David Lovelock, research vice president at Gartner. “Through the remainder of 2019, the U.S. dollar is expected to trend stronger, while enduring tremendous volatility due to uncertain economic and political environments and trade wars.

“In 2019, technology product managers will have to get more strategic with their portfolio mix by balancing products and services that will post growth in 2019 with those larger markets that will trend flat to down,” Lovelock says. “Successful product managers in 2020 will have had a long-term view to the changes made in 2019.”

Gartner has revised its IT spending forecasts for 2019 to the following:

  • Enterprise software = 7.1 percent growth, to $427 billion
  • IT services = 3.5 percent growth, to $1,016 billion
  • Communication services = 0.1 percent decline, to $1,487 billion
  • Devices = 1.9 percent decline, to $655 billion
  • Data center systems = 2.8 percent decline, to $204 billion

The shift of enterprise IT spending from traditional (non-cloud) offerings to new, cloud-based alternatives is continuing to drive growth in the enterprise software market. In 2019, the market is forecast to reach $427 billion, up 7.1 percent from $399 billion in 2018.

The largest cloud shift has so far occurred in application software. However, Gartner expects increased growth for the infrastructure software segment in the near-term, particularly in integration platform as a service (iPaaS) and application platform as a service (aPaaS).

“The choices CIOs make about technology investments are essential to the success of digital business. Disruptive emerging technologies, such as artificial intelligence (AI), will reshape business models as well as the economics of public- and private-sector enterprises. AI is having a major effect on IT spending, although its role is often misunderstood,” Lovelock says.

“AI is not a product, it is really a set of techniques or a computer engineering discipline. As such, AI is being embedded in many existing products and services, as well as being central to new development efforts in every industry. Gartner’s AI business value forecast predicts that organizations will receive $1.9 trillion worth of benefit from the use of AI this year alone,” Lovelock says.

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