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IT spending skyrockets as businesses spend up large on 3rd Platform

By Shannon Williams
Tue 30 Aug 2016
FYI, this story is more than a year old

IT spending on a global level is skyrocketing, with new forecasts predicting the market to reach $2.7 trillion in 2020.

According to IDC’s Worldwide Semiannual IT Spending Guide: Vertical and Company Size, positive momentum displayed in big industries like financial services and manufacturing, where companies continue to invest in 3rd Platform solutions (e.g. cloud, mobility, and Big Data) as part of their digital transformation efforts, are driving the market.

The forecast reveals the telecommunications industry is to remain relatively sluggish, although spending levels are expected to gradually improve compared to the past several years.

Combined, these four industries (banking, discrete manufacturing, process manufacturing, and telecommunications, which are also the industries with the largest IT expenditures) will generate nearly a third of worldwide IT revenues throughout the forecast, IDC says.

Consumer purchases accounted for nearly a quarter of all IT revenues in 2015, thanks to the ongoing smartphone explosion. But consumer spending for PCs, tablets, and smartphones has been weakening, which will have a dampening effect on the IT market overall.

Looking ahead, IDC says even the moderate growth forecast for the tablet market will be driven by commercial segments rather than consumer tablet sales.

"While the consumer and public sectors have dragged on overall IT spending so far in 2016, we see stronger momentum in other key industries including financial services and manufacturing," explains Stephen Minton, vice president, Customer Insights and Analysis at IDC.

"Enterprise investment in new project-based initiatives, including data analytics and collaborative applications, remains strong and mid-sized companies have been especially nimble when it comes to rapidly adopting 3rd Platform technologies and solutions,” says Minton.

“Assuming the economy remains stable in 2017, smaller businesses will also begin to climb aboard the 3rd Platform in greater numbers."

According to the forecast, healthcare will remain the fastest growing industry with a five-year CAGR of 5.7%, despite concerns that spending growth may have peaked.

Banking, media, and professional services will also experience solid growth with CAGRs of 4.9% and combined revenues of more than $475 billion in 2020.’

Elsewhere, gradual improvement is expected in the public sector, although government purchases of technology will continue to lag behind much of the private sector, IDC says.

Similarly, IT expenditures in the natural resources industry are forecast to recover as the price of oil rebounds from recent lows.

"In the U.S., the greatest near-term growth is expected among healthcare providers, professional services firms, banks and securities and investment services organisations," explains Jessica Goepfert, program director, Customer Insights and Analysis at IDC.

"These service-based organisations are turning to 3rd Platform technologies like mobility and big data to enable more productive and meaningful ways to engage with clients,” eshe says.

“In addition to these customer-centric priorities, businesses operating in regulated environments are also turning to technology to assist with compliance."

In terms of company size, more than 45% of all IT spending worldwide will come from very large businesses (more than 1,000 employees) while the small office category (the 70-plus million small businesses with 1-9 employees) will provide roughly one quarter of all IT spending throughout the forecast period. Medium (100-499 employees) and large (500-999 employees) business will see the fastest growth in IT spending, each with a CAGR of 4.4%.

"The small business market has been challenged by the economic slowdown in some regions but there is now some pent-up demand for IT assets in this segment, which will materialise as the economy begins to improve," Minton says.

"Meanwhile, the strongest growth is still among mid-sized companies, which are more nimble than very large enterprises and less exposed to economic volatility than the smallest businesses."

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