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What's Driving Business Technology Spending Disruption?

Cloud Services Will Disrupt Traditional IT Budgets

It's a given, this year more CIOs will shift their focus from selective IT efficiency to overall IT effectiveness. In 2014 and beyond, enterprise IT leadership will be judged on their ability to meet the demands of tech-savvy Line of Business users.

This is the type of meaningful progress that CEOs have been anticipating. But that organizational realignment won't always translate into higher budgets. Here's why.

According to the latest market study by International Data Corporation (IDC), worldwide IT spending will increase by just 4.1 percent in constant currency this year -- that's down from their previous forecast of 4.6 percent and also down from 2013 growth of 4.5 percent.

IDC believes that pent-up demand should eventually drive more business technology capital spending in the second half of 2014, as some organizations replace ageing infrastructure -- including servers, storage and networking equipment. So, what caused this dip in IT spending?

"As smartphone growth continues to cool from the phenomenal expansion of the past few years, tablet shipments have also performed weaker than expected over the past couple of quarters," said Stephen Minton, vice president at IDC.

Cloud Services Will Disrupt Traditional IT Budgets
Around 10 percent of software spending will have already moved to the cloud by the end of 2014, while Infrastructure as a Service (IaaS) will represent 15 percent of all spending on servers and storage.

While this shift is creating significant disruption, it's also driving equally significant short-term opportunities for smart CIOs and IT managers that can successfully deploy cloud-based solutions.

Meanwhile, both cloud and traditional IT spending will be driven by the underlying demand for server and storage capacity, fueled by the data generated from the previous explosive growth of mobile devices in the workplace.

The opportunity to extract value from this accumulated Big Data repository is also driving strong demand for analytics tools. How they decide to deploy these tools will be the subject of much debate among IT leaders.

Many organizations will choose a gradual journey to adopt cloud services -- with security, reliability and regulatory factors in mind, they'll likely deploy more open hybrid cloud solutions.

Global Pockets of New Business Technology Spending
Based upon IDC's regional assessment, Western Europe is forecast to reach IT growth of 2 percent in constant currency terms, as most countries continue to shake off the debt crisis and return to a more stable business climate.

Similarly, business confidence is gradually improving in the U.S. market, after the sequester and government shutdown of last year. Server and storage spending will rebound to positive growth after last year's slowdown, while IT services growth will accelerate to more than 2 percent.

In Canada, IT spending growth will accelerate from 3.3 percent last year to 5 percent in 2014 -- mostly due to stronger spending on PCs, servers and storage.

Japan is a different story. The prior demand was largely consumed in 2013, when the government's deflation-busting policies boosted business confidence and when IT buyers moved to take advantage of lower prices before new taxes came into effect at the beginning of 2014.

As a result, IT spending in Japan increased by 3.4 percent last year, but will decline by 1 percent in 2014.

Read the original blog entry...

More Stories By David H Deans

David H. Deans is the Managing Director at the GeoActive Group. He has more than 25 years of experience in the Technology, Media and Telecom sectors.

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