Enterprise IT Spending On The Decline

The Software-as-a-Service and cloud technology revolutions are making waves in the market today, but new predictions show a less optimistic view of the enterprise technology industry.

An announcement from Gartner released Tuesday (June 30) revealed that analysts predict enterprise spending on IT to decline by 5.5 percent, hitting $3.5 trillion in 2015. Enterprise software alone will see a 1.2 percent decline in 2015 sending.

But the authors of the report, “Gartner Worldwide IT Spending Forecast,” stress that this forecast is not necessarily indicative of a massive slump in the industry. “We want to stress that this is not a market crash,” said Gartner Research Vice President John-David Lovelock. “Such are the illusions that large swings in the value of the U.S. dollar versus other currencies can create.”

That fluctuation of the U.S. dollar is most responsible for the trend, researchers found. And while the market should not go into panic mode, there will be consequences to reduced spending on enterprise software and IT in general.

“However, there are secondary effects to the rising U.S. dollar,” Lovelock added. “Vendors do have to raise prices to protect costs and margins of their products, and enterprises and consumers will have to make new purchase decisions in light of the new prices.”

According to Gartner statistics, enterprise software saw a 5.7 percent growth in spending in 2014, making the 1.2 percent decline in spending all the more noticeable. Enterprise software spending this year is expected to hit $310 billion. Despite this drop, however, B2B SaaS vendors are not likely to raise prices, Gartner said, “because Software-as-a-Service is about market share, not profitability,” the firm’s announcement declared. SaaS vendors are not willing to lose a business client due to increasing their prices.

Even spending on Big Data IT and storage is expected to weaken, though corporate budgets for data center systems are expected to remain stable, researchers found.

On the bright side, Gartner said it predicts that spending on IT consulting will see a moderate increase both this year and next “as vendors have demonstrated their ability to stimulate new demand from buyers looking for help with navigating business and technology complexities, particularly related to building a digital business,” said the firm, adding that corporate buyers are looking for solutions that are easy to implement and at lower costs.