Recent volatility will gradually give way to a more positive outlook for IT spending in the second half of 2014, according to global analyst firm IDC.
With mature economies mostly heading in the right direction and a significant commercial PC refresh cycle already underway, improvements in business confidence are set to drive a moderate infrastructure upgrade cycle over the next 12-18 months, while investments in software and services will continue to accelerate.
As a result, IDC worldwide IT spending is now forecast to increase by 4.5% in 2014 at constant currency, or 4.1% in US dollars.
A significant proportion of this growth is still being driven by smartphones – IT spending excluding mobile phones will increase by just 3.1% this year in constant currency (2.8% in US dollars).
Aside from smartphones, the strongest growth will come from software, including rapidly expanding markets such as data analytics, data management, and collaborative applications including enterprise social networks.
The 3rd platform pillars of Big Data, Social, Mobile and Cloud will continue to drive virtually all of the growth in IT spending, while spending on 2nd pPlatform technologies will remain effectively flat.
Meanwhile, although some emerging markets remain constrained by macroeconomic and geopolitical wild cards, there is now significant pent-up demand for IT investment that will drive stronger growth next year in markets including India, Brazil, and Russia.
Pent-up demand has already driven a significant rebound in both consumer and enterprise IT spending in China this year, as confidence stabilizes.
While mature economies are still driving the upside in 2014, emerging markets will once again dominate in 2015.
Cold snap and wild cards impacted IT spending...
Some IT market segments performed weaker than expected in the first quarter of 2014 (1Q14), in line with the weather-related slowdown in US output and the impact of wild card events including the conflict in Ukraine.
In particular, an overdue enterprise infrastructure refresh cycle was disrupted by short-term declines in business confidence.
However, strong underlying demand for this investment cycle will drive improvements in the server, storage, and network infrastructure markets in the coming months.
"At the beginning of 2014, we asserted that businesses would choose to fix the roof while the sun was shining," says Stephen Minton, Vice President in IDC's Global Technology & Industry Research Organization (GTIRO).
"Unfortunately, the weather was literally much colder than expected during the first quarter.
"The good news is that the U.S. economic outlook has already brightened and this will drive a period of moderate but long-awaited investment in mission-critical infrastructure over the next year.
"However, accelerating adoption of cloud services will continue to impact sales of traditional on-premise equipment, packaged software, and IT services.
"This capital spending cycle will be mild by historical standards."
PC refresh stronger than expected - tablet demand weaker...
Minton says the commercial PC refresh has proven stronger than originally forecast. As a result, IDC now forecasts PC spending will increase by 3.5% in 2014 (the fastest pace since the post-financial crisis rebound of 2010).
"The end of support for Windows XP is obviously part of the story," Minton adds.
"But there has also been a transition of some spending from tablets to PCs as consumers and businesses have allocated disposable income and IT budget to replacing older notebooks and desktops rather than upgrading their relatively new tablets.
"The tablet market is also more sensitive to economic wild cards and price competition, now that penetration rates have increased.
"There's still plenty of growth ahead for tablets, however, and it would be premature to say that improvements in the consumer PC market represent anything like a reversal of the long-term shift to tablets and hybrids over the long term."
IDC also claims worldwide tablet spending has slowed from 29% year-over-year growth last year to 8% in 2014, but will accelerate back to double-digit growth next year (10%).