Global IT spending set to recover in 2014, reports show

Nov. 6, 2013 at 4:02 PM
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SANTIAGO, Chile, Nov. 6 (UPI) -- As global spending on information technology swings toward a rebound, Latin America is set to spend more on new purchases, regeneration and updates, both in business and public sectors, data from different think tanks and research groups indicated.

IT spending in the banking, capital markets and insurance industries in 2014 is set to grow by 7 percent in Latin America, Asia Pacific and elsewhere, Business News Americas said.

Worldwide financial services spending on IT is expected to reach more than $430 billion in 2014, with banks accounting for $215 billion of that figure, IDC Financial Insights said in a survey cited by Bank Systems and Technology.

"Bankers continue to be selective with IT initiatives, focusing on those that can deliver value to their clients and the organization, while also satisfying the mandate of reducing costs and improving efficiency," IDC Financial Insights Karen Massey said.

"Expect to see projects around risk and compliance, core and infrastructure modernization, customer experience, and security, which are lifting our otherwise tempered forecasts."

In the latest report, released Wednesday, IDC Worldwide Black Book said worldwide IT spending will accelerate in 2014 after dipping to its slowest pace of growth in 2013 since the 2008-09 financial crisis.

Overall technology spending is on course to increase by 4 percent this year at constant currency, reaching $2.04 trillion, down from the 2012 growth of 5 percent due mainly to the slowdown in key emerging markets, including China and Russia.

In 2014, a rebound in China and continued momentum in the United States and Europe will see a return to overall industry growth of more than 5 percent, reaching $2.14 trillion.

IT spending increases are partly a response to cyber threats employing new technologies but also the result of technological regeneration, updates and re-installations of IT capacity.

In Latin America, in particular Brazil, a rapid switchover to smart metering in the country's utilities networks is also cited by experts as a driver for new IT expenditure.

Stepped up airport security, including installation of body scanners, contributed to the increase.

Almost half of this year's IT growth is due to continued strength in smartphone and tablet shipments. Excluding mobile phones, IT spending will increase by only 2.6 percent in 2013 at constant currency, or just 0.7 percent in U.S. dollar terms, based on year-to-date exchange rates, the report shows.

Enterprise IT spending in many regions has been tepid since 2012, with weaker spending on purchase of computers, servers, and storage than previously expected.

Tentative signs of stability in commercial PC shipments during the third quarter, however, may foreshadow the gradual recovery in enterprise infrastructure investment expected 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 percent in 2013 before accelerating to a 4 percent growth in 2014.

"This has been a tough year for many IT vendors, with infrastructure spending in the first half of 2013 proving weaker than previously expected," said Stephen Minton, vice president in IDC's Global Technology and Industry Research Organization.

"The overall industry has been propped up by continued strength in mobile devices, especially smartphones, but the slowdown in emerging markets was another headwind for infrastructure-focused tech firms on top of government sequestration in the U.S. and continued sluggish growth in Europe."

The United States IT market remains resilient, however.

While the United States is on course to post IT spending growth of 5 percent 2013, this translates into just 3 percent excluding mobile phones. Enterprise spending in the United States has been relatively resilient, given the ongoing political volatility, but spending on PCs and servers will decline this year while storage investment is flat, Minton said.

Both the storage and server markets in the United States are expected to improve in 2014, but PC spending is likely to remain weak in spite of signs of stability in the third quarter as tablet cannibalization continues at lower price points.

"The U.S. market has held up pretty well, all things considered," Minton said. Outlook for emerging markets also remains strong.

"In recent years, growth in emerging markets has been a pot of gold for many global IT suppliers, as they capitalized on huge opportunities to expand into new territories even while growth in developed economies was anemic," said Minton.

"This year has been a different story, with some organizations stung by the large bets they placed on a continuation of those growth trends. It's important to remember that growth in emerging markets will continue to outpace the U.S., Europe, and Japan, in spite of these bumps in the road, and that any retreat from those geographies will only be to the benefit of emerging competitors from China and elsewhere with global ambitions of their own."

IDC's Worldwide Black Book provides forecasts for IT spending in 54 countries around the world. IDC is a subsidiary of International Data Group, a leading technology media, events and research company with headquarters in Boston, Mass. IDG says its brands reach an audience of more than 280 million. technology buyers in 97 countries.

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