calculator and graphs

Lies, Damned Lies, And IT Budgets

calculator and graphsAuthor Mark Twain is said to have lamented the three types of lies: lies, damned lies and statistics. Twain, who knew a thing or two about people, also said “The secret of getting ahead is getting started.“, and given the latest numbers on IT budgets, too many businesses are not paying attention to this formula for success.

According to the latest numbers from Gartner, the forecast for IT spending for 2014 has been reduced from 3.2% growth to just 2.1% from last year’s $3.673 trillion. Now, $3.7 trillion is nothing to sneer at, and it’s much better than the 0% growth seen last year, but given how so many demands on IT are skyrocketing, I found the numbers surprising.

“Price pressure based on increased competition, lack of product differentiation and the increased availability of viable alternative solutions has had a dampening effect on the short term IT spending outlook,” said Richard Gordon, managing vice president at Gartner. “However, 2015 through 2018 will see a return to ‘normal’ spending growth levels as pricing and purchasing styles reach a new equilibrium. IT is entering its third phase of development, moving from a focus on technology and processes in the past to a focus in the future on new business models enabled by digitalization.”

Both enterprise software ($321 billion, up 6.9%) and IT services ($967 billion, up 3.8%) exceeded the projected tepid growth. Data center systems ($140 billion, 0.4%) and telecom services ($1.635 trillion, up 0.7%) turned in the weakest outlooks.

Gartner stated that one of the major contributors to weaker-than-expected IT services growth was that public cloud services are proving increasingly cannibalistic to more traditional data center outsourcing services. Implementation services are also growing more slowly than expected, as risk-averse buyers remain focused on smaller, safer projects and some of the largest sellers remain focused on maintaining margins over growing revenue.

Data is already growing annually in the 50%-plus range, with backup data being one of the guiltiest culprits behind this growth. Between 2010 and 2012, the average enterprise server backup data store grew by 42%, while file storage grew by 28%.

Forecasts for the cloud market project it will triple by 2017 to $235.1 billion, while spending on cloud-related technologies and services will be up 20% this year, to $174.2 billion. Revenue from Ethernet services delivered on 10GE and 100GE is forecast by Infonetics to grow 300% between 2013 and 2018.

With more than six years left to go, 2020 forecasts for the Machine-to-Machine (M2M) market are soaring, jumping 50% in the last few months. IT is also significantly underestimating the scale of bring your own application (BYOA). They estimated they have, on average, 2.8 applications that were brought into the organization by employees, but the average is closer to 21 apps — 10x that.

“We should all aspire to be innovators,” said actor, director and impressionist Kevin Spacey at a recent IBM conference. “The risk takers are rewarded.”

Clearly the latest IT budget numbers indicate there are too few organizations innovating, which should leave a much bigger opportunity for those companies that are willing to take risks. If you haven’t started innovating, what’s stopping you?

About the author
Steve Wexler

Steve is a proficient IT journalist, editor, publisher, and marketing communications professional. For the past two-plus decades, he has worked for the world’s leading high-technology publishers. Currently a contributor to Network Computing, Steve has served as editor and reporter for the Canadian affiliates of IDG and CMP, as well as Ziff Davis and UBM in the U.S. His strong knowledge of computers and networking technology complement his understanding of what’s important to the builders, sellers and buyers of IT products and services.