Worldwide IT spending is projected to total $3.46 trillion in 2017, a 2.7% increase from $3.38 billion in 2016, as per a recent report from information technology research and advisory firm, Gartner Inc. IT.
If this happens, the year will mark a solid recovery in IT spending after two consecutive years of decline. Notably, in 2015 and 2016, worldwide spending declined 5.5% and 0.6%, respectively.
Worldwide IT spending forecast provided by Gartner indicates major technology trends across, IT services, hardware, software and telecom markets. The firm has been providing forecasts for more than a decade and organizations have been using its reports to make critical business decisions.
Although the recent forecast is 0.2% lower than its previous projection of 2.9% growth, John-David Lovelock, research vice president at Gartner is confident that year 2017 is “poised to be a rebound year in IT spending”.
According to Lovelock, the growing adoption of cloud, blockchain, digital business and artificial intelligence are driving IT spending and may even push it beyond the projected 2.7% growth. However, he opines that due to some political uncertainty in global markets various enterprises might adopt a “wait-and-see approach” and “forestall IT investments”.
Per its latest report, every IT segment will witness growth in spending with Enterprise Software leading the way. It may witness a 6.8% rise this year and reach $355 billion.
It will be followed by the IT Services segment, which is anticipated to register 4.2% growth in spending and reach $938 billion. The growth is expected to be mainly driven by increased investments digital business, intelligent automation, and services optimization and innovation, which will be partially offset by broad economic challenges.
Spending across Data Center Systems segment may see a 2.6% increase and touch $175 billion mainly driven by an anticipated rise of 5.6% in the global server market. The growth across global server market will be driven by “aggressive build-out of cloud computing platforms by companies” including Amazon AMZN, Alphabet GOOGL aka Google and Microsoft MSFT.
The Communication Services segment is likely to witness growth of 1.7% and reach $1.41 trillion. Spending on Devices is projected to remain almost flat at $589 billion.
Apart from providing estimates for 2017, the IT research firm also provided forecasts for 2018, which according to it will mark another year of growth. For 2018, Gartner predicts worldwide spending to reach $3.55 trillion, marking growth of 2.6% from the 2017 estimated level.
Enterprise Software segment will continue to lead with 7% anticipated growth, while IT Services, Data Center Systems and Communication Services segments will witness a respective increase of 4.7%, 1% and 1.3% in spending. Spending on Devices will continue to remain flat.
However, it should be noted that despite projections of growth in 2017 and 2018, overall IT spending will remain below the 2014 level of $3.8 trillion.
Over the last one and a half years, worldwide IT spending has been hit hard by global concerns such as a persistent decline in oil prices, slowdown in the Chinese economy and a strong U.S. dollar against major currencies. Additionally, last year’s events like the hype over Brexit, the U.S. Presidential election and the Fed rate hikes also made organizations tighten their spending on IT.
Nonetheless, the recent forecasts provided by Gartner depict that this year may witness a revival in overall spending, primarily led by Software and IT Services segments.
So, it will be prudent to shift your focus to Software and IT Services stocks that still hold promise. Stocks like NIC Inc. EGOV, Check Point Software CHKP , Xplore Technologies Corp. XPLR and Exa Corporation EXA are backed by a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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