The strong US dollar will lead to $64bn less growth in IT spending, according to Gartner’s latest forecast.
Worldwide IT spending is projected to total $3.5tn in 2017, a 1.4% increase from 2016. But the growth rate is down from the previous quarter’s forecast of 2.7%, due in part to the rising US dollar.
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Cloud computing is having a major impact on datacentre system spending, according to Gartner.
“We are seeing a shift in who is buying servers and who they are buying them from,” said John-David Lovelock, research vice-president at Gartner.
“Enterprises are moving away from buying servers from the traditional suppliers and instead renting server power in the cloud from companies such as Amazon, Google and Microsoft. This has created a reduction in spending on servers, which is impacting the overall datacentre system segment.”
Lovelock estimated that although the cost of running a workload on Amazon Web Services (AWS) is probably more expensive than running the same workload on-premise, the difference soon diminishes once all the on-premise support infrastructure and staffing is taken into account.
“AWS might be a little more expensive, but you don’t need staff or lighting,” he said. If all the additional costs to support a workload running on an on-premise server are accounted for, cloud-based IT works out cheaper, said Lovelock.
Lovelock said he expects enterprises to continue to buy two-way and four-way servers, but the decline in server sales will eventually hit a tipping point, where the mainstream server makers can no longer financially justify products. Cloud providers do not generally buy from the major server manufacturers, preferring contract manufacturers. This is exacerbated by enterprises buying fewer on-premise servers, and choosing cloud services for new workloads.
As Computer Weekly reported previously, HPE’s first-quarter 2017 results were affected by significantly lower demand for servers from one of its tier-one service provider customers. While CEO Meg Whitman did not confirm whether this was due to the customer choosing to buy from a contract manufacturer, it shows the precarious position the top server makers now face as their enterprise customers opt for cloud computing.
Gartner has forecast that the 2017 worldwide IT services market will grow by 2.3% in 2017 – down from 3.6% growth in 2016. The analyst firm attributed the modest changes to the IT services forecast this quarter to adjustments to particular geographies as a result of potential changes in direction for US policy – both foreign and domestic.
Gartner expected the business-friendly policies of the new US administration to have a slightly positive impact on the US implementation service market, with the US government thought to be planning a significant increase in infrastructure spending over the next few years.
Cloud as an outsourcer
There are already early signs of companies starting out on the road to a cloud-only world. Lovelock pointed to the $2bn, five-year outsourcing contract Snapchat had signed with Google Cloud.
In a US Securities and Exchange S1 filing, the photo messaging company said its software and computer systems had been built to use computing, storage capabilities, bandwidth and other services provided by Google.
“We currently have a capital-light business model because we work with third-party infrastructure partners – primarily Google Cloud – to run and scale our services rather than building our own infrastructure, which would require significant up-front capital and resources,” said the company’s filing.
“We believe working with these partners will result in lower costs for us in both the short and long term. Large-scale infrastructure providers offer several advantages, including global scale to serve our audience, the ability to handle peak demand more economically, and purchasing power to procure equipment directly from infrastructure equipment suppliers that results in lower net costs to us.”
“Google is doing IT for Snapchat,” added Lovelock.
Desktop shift to BYOD
Driven by strength in mobile phone sales and smaller improvements in sales of printers, PCs and tablets, worldwide spending on devices (PCs, tablets, ultramobiles and mobile phones) is projected to grow by 1.7% in 2017, reaching a potential $645bn.
But in mature markets, spending on laptops, PCs, tablets and smartphones is expected to remain flat in 2017, according to Gartner. “There is a shift in spending over to IoT [information of things] devices,” said Lovelock.
He predicted that the bring-your-own-device [BYOD] trend would carry on to a point where many organisations will no longer see a need to supply devices to their employees. “This would be a great way to get desktop IT off your books,” he said.
Organisations that have high security requirements will still need to supply devices to staff, said Lovelock, but he added: “If enterprises put critical applications in the cloud, device security is less important. Enterprise containers, software and policy will all help to secure BYOD devices.”
Along with BYOD, Lovelock expected users to buy software and apps for their own devices, which they also use at work. Some of these will be free and funded by advertising, such as those on the Google Play store, while some, such as on Apple’s App Store, may require payment from the consumer.