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Alarm Bells Sound on IT Spending in 2016

Against a backdrop of general warnings about the global economy in the financial sector, IDC is ringing new alarm bells about IT spending for 2016.

In a news release Wednesday, IDC revised its 2016 forecast and projected that worldwide IT spending would post a "major slowdown" in 2016, thanks mostly to economic weakness in emerging markets and smartphone saturation. Overall, IDC expects global IT spending for hardware, software and services to reach $2.3 trillion this calendar year. That's about a 2 percent increase, which is about a third of the roughly 5-6 percent growth in IT spending every year since recovery from the financial crisis.

For IT companies doing business in the United States, though, 2016 could be OK. IDC is looking for stable spending, with an increase of about 4 percent. Breaking that figure down into its component parts, IDC is calling for a decline in the PC market, slower growth for servers and storage, and strong investments in big data, cloud, mobile and social.

Lest the U.S. tech industry get too comfortable, IDC warns that weakness in China and other fragile emerging markets could spark global problems. "The downside risks have now increased across all geographies, and the likelihood of a more widespread slowdown in IT spending is now higher than three months ago," said IDC analyst Stephen Minton.

A new feature of financial earnings calls for U.S.-based multinationals has been the caveat "constant currency." The strong U.S. dollar has led to revenue declines or slower growth even as products grow by other measures internationally for companies like Microsoft. That currency volatility seems set to continue for the duration of the calendar year, IDC says.

One bright spot in the IDC forecast for the rest of 2016: channel companies that have made the transition to acting as service providers. "IT buyers continue to prioritize software investments like data analytics and enterprise mobility, and have increasingly leveraged the service provider model in order to increase the effectiveness of their IT budgets," Minton said. "Underlying buyer sentiment is strong."

Posted by Scott Bekker on February 17, 2016