IT Spending Remain Robust -- For Now

Traders Magazine Online News, August 29, 2018

Rob Daly

Wall Street's investment into information and communications technology should remain stable over the next 12 months but could start tapering in later 2019 and beyond, according to research published by industry analysis firm IDC.

“Financial services continues to be on of the fastest growing industries from a global perspective,” said Stephen Minton, vice president, customer insights & analysis at IDC, during a webinar discussing the firm's outlook for ICT spending for the second quarter.

Minton cited that from 2017 through 2022, IDC estimates that securities/investment services and banks would increase their investments in server-based storage by approximately 2.6% and 1.8% respectively.

Following macroeconomic trends that correlate well with the growth in ICT spending, such as the growth of corporate profits, Minton expects strong support for traditional ICT spending.

"Profit growth is up 6 percent in the US, which historically is a pretty good strong indicator for healthy IT spending, which likely will trail off in the next few years," he said.

Even lagging indicators like unemployment have remained strong.

“It generally bodes well for ICT budgets since it means that businesses need to invest in technology to support their employees,” he said.

However, Minton noted that there is a decline in business confidence and economic activity, which will have a net impact on overall ICT spending.

"Businesses just get more cautious and uncertain about exactly what is coming down the road in the next 12 to 18 months," he said. "They start putting contingency plans in place. And of course, when those contingency plans are in place, it does not take long for cutbacks to start to happen if there is a slowdown in the economy and companies start to pull back on their capital spending ."

The loss in business confidence also comes at a time where the research firm expects to see a cyclic slowdown in the US economy beginning around 2020.

“It is related more to the increase in interest rates than with trade wars," said Minton. "Traditional ICT spending has been in a strong cycle over the last 18 months, but IDC expects that to wind down starting in the next 12 months."

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