IT spending in APAC bleak, US sprints ahead

by Sohini Bagchi    Jul 17, 2013

bleak business

In the past few months, analysts have projected that the Asia-Pacific region will drive the technology spending over the next one year. However, a new report by Forrester Research predicts that the U.S. will be the biggest-spending country accounting for $819 billion in spends this year, rising to $875 million in 2014. Andrew Barrel, senior analyst at Forrester, notes that on one hand, the strength of the dollar is enabling the US to drive global IT spend. On the other, US has always been the biggest consumer of IT – which is nearly the size of Western Europe and Asia combined in terms of IT spend. These factors combined will give power to the US in the coming year.

According to Forrester’s mid-2013 global tech market update report, Asia-Pacific region will see a decline, owing to the declining markets in China and India and this will affect the overall IT spends worldwide in 2013.

The blame game

Forrester estimates the overall APAC region will grow by 4.3% percent, but with an increase in the strength of the US dollar, the market will actually be in decline by 3.2%. The blame has been placed on China in particular that witnesses a current growth of 7.8%. This is certainly down from the 2011 figures where the country’s IT spending was projected 9.3%. This growth will further slow down to 7.4% by the end of this year, predicts the analyst firm.

Forrester has also predicted mediocre growth for India. According to the report, the country will witness 5.8% growth in IT spends this year, a rise of 2% from the previous year, which is again trifling compared to its recent 7.6% growth in 2011. In fact the report expects that the combined growth of India and China to be dismal, plummet below 7%. However, the Indian market will improve in 2014, due to the effort of investing in emerging technologies.  such as mobile, cloud and social.

Of the other markets in the Asia-Pacific, IT spend in Australia is expected to decline from 3.6% in 2012 to 2.5% in 2013. The decline however, will not have any negative impact on the country’s business. Japan in fact will be at a more strategic position this year, says Forrester. After posting negative growth figures over the past two years, it is expected to touch 1.8% in 2013, with the government introducing a number of stimulus policies.

A gloomy outlook

Overall, Forrester has made a dull assessment of IT spends globally as compared to Gartner, which has estimated a growth of $3.7 trillion. Forrester projects an investment of $2.06 trillion across software, hardware, and IT services by enterprises and governments in 2013. Worldwide majority of the growth will come from large enterprise and government organizations.Gartner and Forrester both agree that currency fluctuation, continued recession in Europe and slowing growth in China as well as rupee falling in India has been responsible for the bleak outlook in the overall IT spending. However, because of dollar strength, the US market and some other emerging markets will show some improvement.

Eastern Europe, Middle East and Africa market for example will grow at 6.9%. By 2014, Latin America will emerge as the fastest-growing region growing at 10.7%. Likewise, Europe seems to be recovering after a huge decline in 2012, with Forrester estimating the spending at $487 million by the end of this year.

Software is where most of the big changes in technology are taking place. There will be an increased focus on cloud-based implementations such as SaaS. Besides smart-computing will continue to grow with the greater spends on analytics, big data and mobile apps.
-Andrew Barrel, senior analyst at Forrester

Software to drive growth

Software is considered to be the biggest area of investments, at $542 million for 2013, according to Forrester. There will be an increased focus on cloud-based implementations such as SaaS. Besides smart-computing will continue to grow with the greater spends on analytics/BI, big data and mobile apps. Overall, software investments are expected to grow 3.3% this year and 6.2% in 2014, says the report.

Software is in fact one area, where analysts have always predicted Asia Pacific region to thrive. As per Gartner estimation, IT spending in the Asia-Pacific is forecast to reach $743 billion in 2013, a 7.9% rise over 2012. In its report on the enterprise software market in Asia-Pacific highlights that India will be the fourth largest enterprise software market in Asia-Pacific reaching over 13% growth, representing $6.7 billion in revenue, or 1.74 per cent of the total worldwide software market revenue of $383 billion.

“Enterprises in Asia-Pacific are expecting to increase their spending on application and infrastructure software,” says Asheesh Raina, principal research analyst at Gartner. He believes that a focus on better customer services, cost efficiency, as well as the incorporation of emerging technologies such as mobility, social, cloud and business process management will continue to drive IT investments in these markets.

Tablets to drive hardware

PCs are a shrinking market. However, Tablets, especially driven by Apple iPads will boom in 2013 and beyond. Forrester projects that sales of tablets to business and government will go up by 36% this year to $21 billion. Samsung and Microsoft will also drive the tablet market, says the analyst firm. “Elsewhere in the hardware market, spending on storage hardware will be flat, purchases of servers will decline by 1%, and sales of computer peripherals will fall by 3%,” Bartels mentions.

However, Gartner seems to be more optimistic amidst uncertainties. As Richard Gordon, managing vice president, Gartner points out an upturn in global economic growth are the major retardants to IT spending and this has caused the pessimistic business and consumer sentiment throughout the world. However, much of this uncertainty is nearing resolution, and as it does, we look for accelerated spending growth by the end of 2013 and throughout 2014.