If you looked at a graph of 2015s worldwide IT spending predictions, you wouldnt know if you were looking at a blueprint for a roller coaster or an IT spending graph. Worldwide IT spending topped out at $3.52 trillion dollars by the end of 2015, but the predictions throughout the year had it going all over the place.
At the beginning of the first quarter, Gartner said IT spending was on pace to grow 2.4 percent in 2015, but by the end of the second quarter, that prediction turned into a decline of 5.5 percent. Their Q3 prediction had it rising to only a 3.5 percent decrease, but by the end of the year that number took a nosedive and ended at nearly a 6 percent worldwide decrease. This was the largest drop in IT spending since Gartner began tracking IT spending. So what caused this historic drop in worldwide IT spending? Its difficult to say exactly what caused this historic event, but heres what we know played a large role.
A Strong U.S. Dollar
Gartner was one of the first to point out at that the main culprit of this IT spending decrease came from a strong U.S. dollar. In 2015, the U.S. dollar kept getting closer and closer to being the same worth as the Euro. According to CNN, the last time that happened was 13 years ago. So whats so bad about a strong dollar? Its a great thing for U.S. shoppers and travelers. It makes the price of imported goods in the U.S. cheaper, and abroad the dollar has a stronger purchasing power. However, for large corporations with a big international presence, this isnt something they want to have. A strong U.S. dollar increases the cost of exports, and in 2015, the price of exports increased by as much as 20 percent.
Political and Economical Instability
Political and economical instability in key countries with emerging markets like Russia, Brazil, and Japan contributed to the IT spending decrease. Organizations in those regions must balance cost cutting with growth opportunities during times of economic concern. When economies are unstable or enter a time of economic recession, banks become more unwilling to lend money. If corporations cant acquire the adequate loans from banks, they cant make the necessary upgrades like improving their IT equipment. That reason alone wont cause an automatic drop in IT spending, but it does lead to an overall slowdown.
A Shift in IT Purchasing
Another big factor to consider for the spending decrease is how and what firms are spending their IT dollars on. As economic issues arise and change, firms must also change how they buy their IT products and services. John-David Lovelock, a research vice president at Gartner said that instead of buying a product license for $1 million, for instance, users are switching to SaaS products for $100,000 a year.
Not only that, but cloud services are continually replacing physical onsite servers. Just this last month, Netflix closed its data center and is now running exclusively on AWS (Amazon Web Services). Why did Netflix make the change? Because the public cloud is more reliable and cost-effective. The flash storage revolution could also be playing a large role. What is flash storage? Flash storage is a solid-state-drive that optimizes price and performance. Its the future of storage and will continue to drive down prices at the lower end as it develops and is implemented.
Bad Retail Sales
Retail sales and IT spending dont have much in common, but since both saw a decrease in 2015, its worth taking a look at. U.S retail sales had their worst year since 2009. Analysts found that for some reason consumers were choosing to save their money more. Analysts also pointed out a fact that could have played a role in the IT spending decrease as well: discounting. If everyone is discounting their products and services steeply, firms are able to get everything they need and want without having to pay more. Discounting info is very anecdotal, so it is difficult to find correlations, but its an interesting fact to consider.
