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Global IT Spending will Top $2 Trillion Per Forrester Research Report

29 Aug, 2013

Channelnomics "Guru" Larry Walsh reported the following last month in his article based on an annual report from Forrester Research. Larry's personal concensus is the following:

The Forrester Research’s annual report on IT spending isn’t great. It projects global business spending on IT goods and services in 2013 will top $2 trillion, a scant increase of just 2.3 percent. Despite the U.S. economy gaining strength, the global numbers are dragged down by stagnation in Europe and an economic slowdown in China.

While the forecast is fraught with troubling signs, there’s much good news for the channel: Services delivered by solution providers and systems integrators actually makes up the bulk of total IT spending.

A $1.7 trillion difference separates the spending forecasts published by Forrester and Gartner, which last month published its report that pegged global IT spending at $3.7 billion. Both reports concur IT spending will increase, but far slower than originally projected. Gartner had pegged IT spending to increase 5.4 percent at the beginning of the year, but has since revised its estimate to 3.3 percent. Forrester is more conservative, believing growth will be less than 3 percent.

Forrester is quick to point out software makes up the biggest segment of IT spending; while tablets, whose sales are projected to increase 36 percent this year, is among the fastest growing products. However, the real story is how much businesses around the world are dependent on the value-add services provided by the channel.

According to Forrester, businesses will spend the following:

$411 billion on IT outsourcing and hardware maintenance.
$389 billion on IT consulting and systems integration services.
$132 billion on custom-built software applications.
Combined, these services segments make up nearly one-half of all IT spending around the world. The United States, which remains the world’s largest IT market, is the source of 41 percent of all IT spending. While it’s a rough approximation, the U.S. services market open to the channel is roughly a $395 billion addressable market opportunity.

For solution providers, service providers and systems integrators, this should be welcomed news. With professional services sustaining margins greater than 60 percent and managed services producing gross profits between 40 percent and 60 percent (according to The 2112 Group’s “Profitability in the Channel” report), the spending not directly involving hardware and software has the potential of producing huge revenues and profits.

Of course, the sale of hardware and software — even commodity products — remain critically important to the market and channel. The sales of servers, storage, business applications, middleware and operating systems are the catalyst for the consumption of managed, cloud and professional services.

On the global stage, the European and China economic troubles are worrisome to IT vendors. However, as Forrester points out, the strengthening U.S. dollar and continued domestic economic recovery will make for a good year in the American IT marketplace. That’s welcomed news for U.S. solution providers.

For more on Larry Walsh and information on Channelnomics please visit http://www.channelnomics.com

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