Enterprise Software Dominates IT Spending Forecast

January 13, 2014 Dan Burger

How’s that IT budget for 2014 coming along? Got that executive seal of approval, or are you still noodling revision number 13? Most budgets in the IBM midrange will likely remain flapjack flat compared to a year ago, but overall worldwide IT spending is predicted to pick up speed. According to the analysts at Gartner, IT spending will tiptoe upward at a 3.1 percent pace reaching a projected total of $3.8 trillion in 2014.

One of the expected economic drivers will be enterprise software led by customer relationship management (CRM), a marketing and sales department favorite, and supply chain management (SCM), which provides benefits for forecasting and demand planning. These are two areas where executives believe IT can have an immediate and significant impact on profits. The Gartner growth prediction here is 6.8 percent this year. The enterprise software segment of IT spending takes the prize for the greatest increase in year over year growth. It also claimed the top spot in 2013 with a 5.2 percent increase.

The common thread shared by both CRM and SCM is the emphasis on analytics. Fortunately the winds of hype have diminished and measuring what matters is rising to the top of the data analytics discussion. Measuring the meaningless? Who would do that? You’d be surprised. Quality of data over quantity of data still is the goal, and big data is not necessarily good data.

“Investment is coming from exploiting analytics to make B2C processes more efficient and improve customer marketing efforts. Investment will also be aligned to B2B analytics, particularly in the SCM space, where annual spending is expected to grow 10.6 percent in 2014,” said Richard Gordon, managing vice president at Gartner. “The focus is on enhancing the customer experience throughout the presales, sales and post sales processes.”

IT services will play a bigger role in IT spending this year. You may have already noticed the spawning season for managed service providers in the IBM i community seems to have no end and we’re just a little fish in the big MSP pond. Look for a 4.5 percent spending increase in IT services.

“We are seeing CIOs increasingly reconsidering data center build-out and instead planning faster-than-expected moves to cloud computing. Despite these small reductions, we continue to anticipate consistent four to five percent annual growth through 2017,” Gordon said.

Also fueling the multi-trillion dollar furnace are devices such as smartphones, tablets, and even PCs. That category is warranting a 4.3 percent growth prediction. You might be surprised to know this segment actually contracted by 1.2 percent in 2013, unless you stop to think about the price erosion factor.

While enterprise software, IT services, and devices are segments that topped the overall predicted increase of 3.1 percent. That leaves data center systems and telecom services as the segments responsible for less glorious spending. Both are warming, according the Gartner forecast, but only by 2.6 percent and 1.2 percent respectively.

For those keeping score on a quarter by quarter basis, Gartner has dialed back this most recent prediction for IT spending. Last quarter, the increased spending was pegged at 3.6 percent. That’s 14 percent shrinkage. Still, compared to a nearly flat 2013, overall growth of 3.1 percent is improvement. And bigger numbers in the area of enterprise software is an encouraging trend.

“A downward revision of the 2014 forecast growth in spending for telecom services–a segment that accounts for more than 40 percent of total IT spending–from 1.9 percent to 1.2 percent is the main reason behind this overall IT spending growth reduction,” Gartner’s Gordon said. “A number of factors are involved, including the faster-than-expected growth of wireless-only households, declining voice rates in China and a more frugal usage pattern among European customers. The latter coincides in Western Europe with a breakout of fierce price competition among communications service providers to retain customers and attract new ones.”

Gartner will offer a more-detailed analysis on IT industry spending in a webinar January 14 at 11 a.m. EDT. To register for that event, follow this link.