IT investment within the Europe, Middle East and Africa (EMEA) region is on track to further growth. IT spending in EMEA is forecast to reach $1 trillion in 2018 - an increase of 4.9 percent from 2017, according to the latest market study by by Gartner.
In 2017, however, all categories of traditional IT spending in EMEA under-performed the global averages. According to the Gartner assessment, currency effects played a significant part in the weakness during 2017, and will also contribute to the forecast shortfall in 2018.
EMEA IT sector market development
"The UK has EMEA’s largest IT market and its decline of 3.1 percent in 2017 impacts the forecast heavily," said John-David Lovelock, research vice president at Gartner. "Weak Sterling and political uncertainty since Brexit are reducing UK IT spending in 2017, while other major IT markets in EMEA grew steadily."
Another significant currency effect is the rapid appreciation of the Euro against the U.S. Dollar -- it provides an incentive for Eurozone countries to defer IT spending to 2018 where possible, in anticipation of even lower prices in U.S. Dollars.
However, there is more to the recovery in 2018 than just currency effects. Strong demand within the enterprise software and IT services categories across EMEA hint at significant shifts in IT spending patterns.
The Gartner forecast highlights that businesses are broadly reducing spending on owning IT hardware, and increasing spending on consuming IT as-a-service (ITaaS). In the total IT forecast the business trends are masked somewhat by consumer spending, but when we look at enterprise-only spending the new dynamics between the categories are much clearer.
EMEA enterprise IT spending in 2017 was weaker than the overall IT spending forecast, declining 1.4 percent. The only category predicted to show enterprise spending growth in 2017 is the enterprise software market at 3.2 percent.
"In 2017, we're seeing a pause in EMEA enterprise spending due to the switch to as-a-service offerings gaining momentum," said Mr. Lovelock. "Among the spending rebounds in 2018, however, we expect lagging markets."
In 2018, total enterprise spending in EMEA will likely grow by 2.8 percent. All categories of enterprise IT spending will return to growth in 2018, but only IT services and software will grow strongly at 4 percent and 7.6 percent, respectively. Enterprise spending on devices and communications services continue to fall behind in 2018, growing at 2 percent or lower, thus failing to recoup the losses of 2017.
Outlook for EMEA IT spending growth
Gartner’s recent public cloud forecast further underlines this change in spending as businesses increasingly adopt cloud models for efficiency and agility. In doing so, they also shift their IT spending toward operational expenditure (opex) service-based models.
Gartner believes that the move to cloud services and opex spending on IT should serve to stabilize the growth in overall IT spending in EMEA in 2018 and beyond. They expect spending will spread out more evenly with fewer spikes of capital investment on hardware.
In both enterprise and overall IT spending forecasts, worldwide and in EMEA, Gartner now forecasts IT spending from 2019 through 2021 will remain close to a 3 percent growth rate each year.