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IT spending growth to be slower than expected in 2014 due to pricing pressure, Gartner says

Enterprise software revenue will see the most growth, at 6.9 percent, according to the research firm

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IT research firm Gartner has cut its forecast for global IT spending by about one-third for this year, blaming a tougher competitive environment and subsequent pressure on vendors to lower prices.

Spending will rise 2.1 percent to US$3.7 trillion in 2014, down from the 3.2 percent growth rate Gartner had predicted for 2014.

The downgraded forecast isn't necessarily a cause for concern, said Gartner managing vice president Richard Gordon in an interview.

"In the context of an improving global economic situation, to have IT spending be anemic, in the low single digits, might be a surprise on the face of it," he said. But customers aren't necessarily cutting back on spending, Gordon said. "They're getting better deals for their money and spending their money carefully."

Data center system spending will be the slowest growing category in 2014, rising only 0.4 percent to $140 billion due to factors such as lower-cost storage options in the cloud and a move away from high-end server systems.

Devices spending will rise just 1.2 percent to $685 billion due to price cuts on mobile phones and tablets, Gartner said.

IT services revenue is expected to jump 3.8 percent this year to $967 billion after "weak vendor performance" in 2013, according to Gartner. Within this category, however, spending on IT outsourcing has been slowed by the ongoing price war between cloud storage vendors. Implementation services revenue is being constrained by customers choosing to conduct smaller projects.

Meanwhile, enterprise software revenue will rise 6.9 percent in 2014 to $321 billion, buoyed by stronger growth in infrastructure software sales but tempered by a slower rise in spending on applications, Gartner said.

The increase in connected devices in the so-called Internet of Things will help push software sales higher in coming years, Gordon said. "With IoT and digital business in general, you've got a lot more data out there that needs to be collected, stored and analyzed."

Finally, telecom services revenue will also see meager growth this year, rising 0.7 percent to $1.635 trillion. Average revenue per user for voice services is expected to decline 10 percent each year through 2018, again due to competitive pressures among carriers as well as emerging free or advertising-supported service offerings, Gartner said.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com



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