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Global IT Spending to Significantly Slow in 2016, Reports IDC

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“The slowdown in China is largely connected to increasing rates of market penetration and price competition, but the current economic uncertainty also represents a significant downside risk for the rest of 2016,” said Minton. “Emerging markets in general are fragile, and weaker growth in China has already had a negative impact on countries such as Brazil. Mature markets like the U.S. and Europe have been somewhat more stable over the past 12 months, but the downside risks have now increased across all geographies, and the likelihood of a more widespread slowdown in IT spending is now higher than three months ago.”

Stable U.S. Tech Market

IDC expects IT spending in the United States to remain “broadly stable,” assuming there are no significant disruptions to the broader economy. IDC forecasts the U.S. IT market to increase by 4 percent for the fourth consecutive year, in spite of an expected decline in the PC market and weakening growth in servers and storage. U.S. businesses continue to invest strongly in third-Platform solutions around Big Data, Cloud, Mobile, and Social. The firm says the “new normal” of 4 percent annual growth in IT spending is likely to continue in 2017, assuming the overall economy remains in line with current expectations.

Slower Growth for Western Europe

Western Europe will post weaker growth in 2016 than in 2015, according to IDC, due to the increased maturity of the smartphone market and a deceleration from the double-digit growth of spending on infrastructure last year. Cloud-related investments remained strong over the past 12 months, in spite of inflationary pressures related to currency devaluation, but there are now signs that momentum in the economy is increasingly fragile. However, growth in IT services and software is expected to remain stable, and IDC also forecasts an improvement in the tablet market after a weak performance last year. Including smartphones, overall IT spending in Europe will increase by 1 percent this year (down from 5 percent growth in 2015).

Asia/Pacific: India is ‘Bright Spot’

The Asia/Pacific IT market will post growth of less than 2 percent in 2016, compared to 7 percent in 2015, largely due to the overall slowdown in China. IDC expects the IT market in Japan to stabilize, recovering to growth of 1.5 percent after posting a slight decline in 2015. India remains “a bright spot,” and posted growth of 13 percent last year in constant-currency terms, driven by a strong PC market, which was propelled by government initiatives and education projects. While a slowdown in PC revenues and more difficult year-over-year comparisons for cloud infrastructure, spending will result in weaker overall IT spending growth of 8 percent in 2016, “underlying sentiment remains strong” and IDC forecasts accelerating growth in software and services.

IDC says India will rebound to double-digit growth in 2017, and will represent “an increasingly vital source of growth” for global IT suppliers over the next five years.

“India is a vital market for tech companies in 2016, representing a market that still has huge room and potential for growth across many sectors,” said Minton. “India’s current importance to many IT vendors in some ways mirrors the importance of China a decade ago. Although the overall market is still much smaller than China, India’s expected rate of growth will see it overtake Australia and Canada to enter the top 10 largest IT markets by 2020.”

‘Volatile’ Emerging Markets

According to IDC, growth in other emerging markets will be more volatile, however, as economic weakness inhibits IT spending. A major slowdown in Russia last year resulted in an IT spending decline of 8.5 percent, and the recovery will be gradual and moderate in 2016 (recovering to sluggish growth of just 1 percent overall).

IDC expects the IT market in Brazil to be “sluggish,” and forecasts it to increase by just 3 percent this year. Excluding smartphones, IT spending in Brazil will post a slight decline, with significant declines in PC and server spending. Overall IT spending in the BRIC (Brazil, Russia, India and China) countries will increase by just 1 percent in 2016.