Population size alone means nothing for IT spending, it’s economic maturity that counts

Published on 9th January 2013 by Yevgeniy Sverdlik

 

While 2013 will not bring an IT spending bonanza, people will not be as shy to invest in technology as they were in 2012, according to Gartner analysts who predict spending to increase by 4.2% from 2012. Gartner’s US$3.7 trillion total-sales projection includes telecommunication services, IT services, devices, software and data center equipment (servers, storage, network).

In 2012, IT spending grew only 1.2%, down from 7.9% in 2011, the analysts said during a webcast Tuesday. That is because macroeconomic uncertainties that were weighing down on investment decisions last year are expected to resolve in the near future. These include the Eurozone crisis and the recent US “fiscal cliff” impasse.

One of the interesting things the researchers pointed out was that per-capita IT spending in a nation depends more than anything on that nation’s economic maturity, which means neither GDP nor size of the population alone is a good indicator of technology spending. The more advanced a country is economically, the more it spends on IT.

Gartner splits this economic realm into three categories: emerging markets, emerged markets and mature markets. Total population of mature markets in 2011 was about 816m, while the population of emerging markets was about 5.57bn. Total IT spending in mature markets that year was about $2.2 trillion, compared to $946bn in emerging markets.

That is while total GDP in both categories was about the same ($34bn in emerging markets and $34.1bn in mature markets). Therefore, the best measure to use when trying to predict growth in IT spending is GDP per capita.

Drilling down into types of IT spending, dynamics in emerging and mature markets are radically different. Per capita spending on telecommunications services in the emerging markets accounted for nearly 63% of all IT spending. In mature economies, that number was about 39%. This was while people and companies in the emerging markets spent about 7% of IT dollars on IT services, compared with 33% in mature markets.

Interestingly, the data-center-equipment portions of spending were more closely aligned between the two categories: 3% in emerging markets and about 4.5% in mature markets.

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Yevgeniy is a San Francisco-based journalist who has covered the data center industry for DatacenterDynamics since June 2009. Prior to that, he was a local daily newspaper reporter in California. He has a degree in journalism from San Francisco State University.