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April 9, 2015

Strong dollar shrinks global IT spend raising crash fears

Gartner has forecast that worldwide IT spending is set to shrink by 1.3%, which is likely to result in increased prices.

By James Nunns

Gartner has forecast that worldwide IT spending is set to shrink by 1.3% to $3.66 trillion, with this spending decreaseattributed to the rising dollar.

John-David Lovelock, research vice president at Gartner, said: "We forecast U.S.-dollar-valued worldwide IT spending in 2015 to shrink by 1.3 percent, down from 2.4 percent growth forecast in last quarter’s update."

"However, this is not a crash, even if it looks like one. The recent rapid rise in the value of the U.S. dollar against most currencies has put a currency shock into the global IT market."

"Taking out the impact of exchange rate movements, the corresponding constant-currency growth figure is 3.1 percent, only off 0.6 percent from last quarter’s update. Such are the illusions that large swings in the value of the dollar versus other currencies can create."

Due to the rise in the dollar, prices for hardware, software and services are likely to increase. This will impact IT spending budgets which will need to be revised in order to cope with the rising prices.

Lovelock, said: "However, this illusion masks a bigger issue that has real implications. Every product or service that has a U.S. dollar-based component must have those costs covered at the lower exchange rate."

"The simple implication is that there will be price rises. However, there are many other market forces at work — protecting U.S. dollar profits will require a nuanced and multifaceted approach involving pricing, partners and product management."

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According to Gartner, the U.S. dollar spending on devices such as PC’s, mobile phones and tablets is set for a 1.2% decline to $685 billion. The spending for all devices in 2015 was revised down due to a slowdown in PC purchases across Europe, Russia and Japan.

Meanwhile, data centre spending is expected to reach $142 billion in 2015, this would respresent a small increase of 0.4% from 2014.

In February, Gartner research showed that IT spending in the UK & Ireland was at 1.4% which at the time was above global spending of 1%. This was attributed to an innovative and aggressive approach from UK and Ireland companies.

It is not clear yet whether the UK and Irish market will remain ahead of worldwide IT spending.

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