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Gartner: Malaysia's 2015 IT spend to increase 7.5% against worldwide decline of 1.5%

AvantiKumar | April 16, 2015
This is not a crash, the rising U.S. dollar is responsible for the global slowdown, said Gartner's John-David Lovelock.

John-David Lovelock, Research Vice President, Gartner Inc 

Photo - John-David Lovelock, Research Vice President, Gartner Inc


According to Gartner, Malaysia's IT spending will increase to MYR65.1 (US$17.56) billion in 2015, a 7.5 percent rise from last year, while worldwide IT spending will decline by 1.3 percent due mainly to the rising U.S. dollar.

Speaking of the latest study, Gartner research vice president, John-David Lovelock said, "We forecast U.S.-dollar-valued worldwide IT spending in 2015 to shrink by 1.3 percent, down from 2.4 percent growth forecast in last quarter's update."

"However, this is not a crash, even if it looks like one," said Lovelock. "The recent rapid rise in the value of the U.S. dollar against most currencies has put a currency shock into the global IT market. Taking out the impact of exchange rate movements, the corresponding constant-currency growth figure is 3.1 percent, only off 0.6 percent from last quarter's update. Such are the illusions that large swings in the value of the dollar versus other currencies can create."

"But this illusion masks a bigger issue that has real implications," he said. "Every product or service that has a U.S. dollar-based component must have those costs covered at the lower exchange rate. The simple implication is that there will be price rises. However, there are many other market forces at work - protecting U.S. dollar profits will require a nuanced and multifaceted approach involving pricing, partners and product management."

The Gartner Worldwide IT Spending Forecast is an indicator of major technology trends across the hardware, software, IT services and telecom markets, said Lovelock.

 The forecasts

Gartner's forecasts are detailed in the three tables below.

1. Malaysia IT spending 2015 - Gartner (April 2015) 

Table 1. (Above) Malaysia IT Spending Forecast (Millions of Ringgit)

Note: Numbers may not add up to totals shown because of rounding. Source: Gartner (April 2015)

2. Breakdown of Malaysian IT spending forecast in 2015  - Gartner (April 2015)

Table 2. (Above) Malaysia IT Spending Forecast Breakdown (Millions of Ringgit)


3. Global IT spending forecast 2015 - Gartner

Table 3. (Above)  Worldwide IT Spending Forecast (Billions of U.S. Dollars)

Note: Numbers may not add up to totals shown because of rounding. Source: Gartner (April 2015)

Lovelock said that the U.S. dollar spending on devices (including PCs, ultramobiles, mobile phones, tablets and printers) for 2015 is forecast to decline 1.2 percent to US$685 billion. Spending for all devices in 2015 was revised down partly due to a slowdown in PC purchases in Western Europe, Russia and Japan, countries where local currency has devalued against the dollar.

The mobile phone market was not as affected by the currency shifts, he said. "Substantial change in the phone mix in emerging markets toward lower-priced smartphones negates price increases of premium phones, resulting in flat phone average selling prices between 2014 and 2015.:

Meanwhile, data centre system spending will reach US$142 billion in 2015, an increase of just 0.4 percent from 2014. "External controller-based storage, enterprise network equipment and servers have all been impacted by the depreciation of some local currencies against the U.S. dollar, but the server segment has seen the biggest impact due to the greater pricing pressure that server vendors are exposed to, due to their relatively lower margins," said Lovelock.

Spending in the enterprise software market was on track to reach US$320 billion in 2015, a 2.3 percent increase from 2014, he said. Nevertheless, this is a downward revision from the last forecast and the result of a substantial reduction in the forecast for office suite spending, reflecting the acceleration of Office 365 adoption. "Office 365 is disrupting traditional revenue flows. Its cost is prorated over the life of the subscription, resulting in significantly lower revenue growth as users transition away from the on-premises model."

In addition, IT services spending will contract slightly to US$942 billion in 2015, down from US$948 billion in 2014. The largest reductions were made in implementation services, especially in the U.S. Although the oil and gas industry is only 1 percent of the IT services market, oil and gas buyers normally react quickly when their prices drop, often cutting back on spending 20 percent or more, said Lovelock. "Because the U.S. is a large oil producer and a large market for IT services, the largest spending reductions on services is expected to take place in the U.S. through 2015 and 2016, with an early impact on implementation services."

He said that growth in spending on telecom services was expected to shrink by 2.6 percent in 2015, to total US$1.57 trillion. "Among the more prominent changes affecting multiple regions were reductions in total connections for developed markets such as the U.S. and several Western European nations, as growth in data-only connected devices and multi-SIM connections were not as high as previously expected."

Gartner's IT spending forecast methodology rests on analysis of sales by thousands of vendors across the entire range of IT products and services.


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