What You Need to Know
Technology and service providers (TSPs) should target industries that show greater resiliency in both the short and long terms, such as transportation; communications, media and services; and insurance. TSPs must be prepared for a recovery of the banking and securities industry by the end of 2013.
TSPs should use the GDP growth across Western Europe as a tool to spot signs of bottoming out and to prepare business plans to allocate resources for 2013 through 2016. For example, the rate of decline in the banking and securities industry has already decelerated, signaling the return of this market, in terms of IT spending, as early as 2013.
Cost optimization will be a persistent and overriding issue for IT buyers, even as markets return to growth. These IT solutions in particular will be in demand across mature markets in 2013.
In Western Europe, struggling countries are changing labor laws to enable internal devaluation (for more detail, see
) and become more competitive. This also includes new laws that allow organizations to cut off costs by reducing their staff when necessary. This is likely to open opportunities in the outsourcing space. IT services providers should leverage their offerings in light of the downsizing that organizations will pursue, especially in Western Europe and North America, and reallocate resources to high-growth regions that will capture the most market growth through 2015.
TSPs should recognize the impact of currency exchange rate fluctuations, which can lead to distorted growth rates and misleading conclusions about market opportunity when growth is measured in a single currency. This impact is especially high for 2012, when the euro has strongly depreciated in comparison with the U.S. dollar.
Findings Top-Line Results
The overall enterprise IT market is predicted to slow down remarkably in 2012, closing the year with a 0.3% growth rate. Notably, some Western countries — especially South European countries — will show steep declines across most industries (and their economic recessionary trends will persist also in 2013). Outside Europe the effects of these recessionary trends will be milder, with IT spending rates close to zero.
The five-year compound annual growth rate (CAGR) for 2011 through 2016 for global IT spending by businesses and public-sector agencies is forecast to be 2.6%.
Currency fluctuations hugely distort demand trends in local markets when measured in U.S. dollars. For example, the sharp appreciation of the U.S. dollar — estimated for 2012 and following years by our economic advisor IHS Global Insight — magnified the rate of market contraction when measured only in U.S. dollars, especially for 2012.
The transportation industry leads the 2012 industry growth at 2.0% (see Figure 1), closely followed by the insurance and retail industries, respectively, with 1.9% and 1.1%. Transportation, insurance, and banking and securities will instead lead in the five-year CAGRs between 2011 and 2016.
Vertical Industry Market Worldwide Growth
Source: Gartner (November 2012)
In terms of changes compared with the previous forecast release (
"Forecast: Enterprise IT Spending by Vertical Industry Market, Worldwide, 2010-2016, 2Q12 Update"
), Figure 2 illustrates at global levels what has happened to the vertical industries during the past quarter. Notably:
The impact of budgetary disciplines by Western governments has started to affect the IT budgets with worsening conditions and overall forecasts for lower IT spending for 2012 as well as for the next four years. Therefore, public-sector industries (such as government and education) accelerate their rate of decline, falling deeper into the negative territory for 2012.
The healthcare provider industry is also affected by the cuts in Europe, where it is largely public, and by the IT budget reduction in North America.
The banking and securities industry has instead decelerated its rate of decline, and it is showing signs of bottoming out due to the already-tough cuts in the industry during 2011 and 2012.
The insurance industry is now implementing cuts that it has tried to avoid during the year, but are necessary to be in line with IT spending metrics for the industry.
The communications, media and services industry is suffering from the general deceleration of investments in the cloud sector.
The supply chain industry is implementing cuts due to the recessionary environment for many of the forecast countries.
Evolution of the Global Vertical Industries Market Along 3Q12
Source: Gartner (November 2012)