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May 19, 2014

IDC: How conflict drags down IT spend

Analyst blames IT spend slowdown on political conflict and deflating tablet market.

By Joe Curtis

Global IT spend won’t match last year’s growth despite growing interest in the cloud because of stuttering tablet sales and volatile emerging markets.

Worldwide IT spending growth will drop nearly half a percent on last year to 4.1% during 2014, reaching $3.7 trillion by the end of the year.

Researcher IDC blamed tablet and smartphone markets which are struggling to maintain the sales growth achieved in recent years. It also pointed to the politically uncertain situation in Ukraine provoking a drop in IT spend around eastern Europe.

But Stephen Minton, VP of global technology & industry research, said the negative factors hid a promising foundation.

He said: "This is somewhat masking a more positive underlying foundation for enterprise IT spending, with firms continuing to invest in working off that pent-up demand to replace old servers, storage and network gear.

"Some of that spending is also driving IT services, despite the fact that an increasing number of businesses are moving more of their traditional IT budget to the cloud."

Minton referred to economic "wild cards", such as China’s recent slowdown and the Russia-Ukraine crisis, contributing to a "general sense of uncertainty" it blames for a lack of business confidence.

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IDC sees Russia’s IT market spend declining 1% after a similar drop in 2013, saying this would impact surrounding economies, while it cited inflation as a factor affecting many emerging markets, including Latin America, India, Indonesia and Turkey.

IDC added that around 10% of software spending will have been reallocated to cloud services by the end of 2014, while Infrastructure-as-a-Service (IaaS) will represent 15% of all spending on servers and storage as cloud becomes more of a focus.

It believes this will create "significant short-term opportunities" for companies offering cloud-based products, but that it will disrupt traditional IT budget spend areas.

Analyst firm Kable last month predicted that cloud spending will grow five times as fast as outlay on IT hardware.

IDC added: "Many organisations will choose a gradual approach for their journey to the cloud, with security, reliability and regulatory factors in mind, implementing hybrid and private cloud solutions. As a result, both cloud and traditional IT spending will benefit from these drivers in the next two to three years."

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