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Home > Sector Profiles > Information Technology

Sector Profiles

Information Technology Industry

Major Industry Trends

The term information technology (IT), sometimes called information and communications technology or ICT, encompasses a vast range of activities. These include:

  • computer programming;

  • computer consultancy;

  • computer gaming;

  • computer networking activities;

  • computing facilities management;

  • data processing;

  • data hosting activities;

  • internet service provision;

  • telecommunications;

  • web portals.

The sector is highly innovative and subject to constant technological development. It is also the source of dramatic changes in business practices in all other industrial sectors. Consumers and businesses now expect to be able to communicate with each other instantly and IT has driven huge increases in productivity in recent decades. A process of convergence has also been underway for some time between IT and telephony, driven by transforming voice traffic from an analogue signal to a digital packet, indistinguishable from other data packets travelling through a computer network.

Cloud computing services are now providing yet another catalyst for ICT convergence, and a revolution in the way businesses operate. Telecommunications carriers are gradually moving IT systems and internet data centers into the cloud, while uniform standards are being developed to speed rapid cloud development. One of the main advantages of cloud computing for businesses is that they no longer need to buy or maintain expensive and energy-draining servers. IT administration, including licensing issues, software updates, and IT security management, is looked after by the cloud computing provider. Cloud computing also allows a dispersed workforce to work effectively, and collaborate easily, even if they are stretched around the globe.

In November 2012, Gartner released a report that said that public cloud services are simultaneously cannibalizing and stimulating demand for external IT services spending. Infrastructure as a service (IaaS) adoption—the most basic and fundamental form of cloud computing service—has expanded beyond development and test use cases, the company said. The Gartner survey found that 19% of organizations are using cloud computing for most of their production computing, and 20% percent are using storage as a service for all, or most, storage requirements. Gartner surveyed 556 organizations, between June and July 2012, across nine countries and multiple industries where cloud planning is a critical issue.

One other key trend is the integration of smart devices, which is changing the way consumers use their home devices (television sets, smartphones, and personal computers or PCs), and blurring the boundaries between these formerly separate industries. As a result of advances in smartphones and tablets, consumers are increasingly using these devices to access the internet. The difference between mobile phones and tablets is also blurring, with phones becoming mobile computers rather than simply a device for making calls or sending text messages.

In January 2013, Gartner said tablets had dramatically changed the device landscape for PCs, not so much by cannibalizing PC sales, but because PC users are shifting consumption to tablets rather than replacing older PCs. Whereas once a world in which individual users would have both a PC and a tablet as personal devices was imagined, Gartner increasingly suspect that most individuals will shift consumption activity to a personal tablet, and perform creative and administrative tasks on a shared PC. There will be some individuals who retain both, but it is believed they will be exception and not the norm.

Software subdivides into numerous specialist areas, from relational database technologies to enterprise applications, to “horizontal” office applications characterized by Microsoft Office, for example.

Somewhat off the main track of IT at present, but very much related to both increases in processor power, and to work in simulation and artificial intelligence, is the field of robotics. This lies outside the scope of this profile, but the linkages between robotics and IT are already transforming both manufacturing and defense.

In addition, the IT arena is characterized by a number of key trends and emerging technologies which, again, have the potential to transform the way businesses currently use IT and carry out their operations, for example, outsourcing IT services, such as desktop PC support, or whole IT-supported functions, such as accounts processing. In technology, the trend to virtualization refers to the ability of large servers to be subdivided into a number of virtual machines, which can be either virtual PCs or virtual servers.

Virtualization carries with it a number of benefits, including stopping what, at one stage, looked like an endless proliferation of servers inside companies. Splitting one large server into a number of virtual servers enables the organization to reduce the number of servers it has to manage. Server virtualization should not be confused with another powerful trend: the creation of virtual environments inside the machine. The fact that desktop processors are now powerful enough to mimic real-world physics in computer space is transforming both design and entertainment.

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Market Analysis

According to the latest forecast by IT market analysis firm Gartner, worldwide IT spending is projected to total US$3.7 trillion in 2013, a 4.2% increase from 2012 spending of US$3.6 trillion. The 2013 outlook for IT spending growth in US dollars has been revised upward from 3.8% in the Q3 2012 forecast. Gartner said much of this spending increase is the result of projected gains in the value of foreign currencies versus the dollar. When measured in constant dollars, 2013 spending growth is forecast to be 3.9%.

In June 2011, Gartner revised its estimate of total spend on IT in 2011 upwards for the second time in the year. It now estimates that global IT spending will grow by 7.1% over 2010’s figure, to US$3.67 trillion.

Worldwide devices spending, which includes PCs, tablets, mobile phones, and printers, is forecast to reach US$666 billion in 2013, up 6.3% from 2012. However, this is a significant reduction in the outlook for 2013 compared with Gartner’s previous forecast of US$706 billion in worldwide devices and 7.9% growth. The long-term forecast for worldwide spending on devices has been reduced as well, with growth from 2012 to 2016 now expected to average 4.5% annually in current US dollars (down from 6.4%), and 5.1% annually in constant dollars (down from 7.4%). These reductions reflect a sharp fall in the forecast growth in spending on PCs and tablets, which is only partially offset by marginal increases in forecast growth in spending on mobile phones and printers.

Gartner says that the tablet market has seen greater price competition from Android devices as well as smaller, low-priced devices in emerging markets, and this shift towards relatively lower-priced tablets has led the company to lower its average selling prices forecast for 2012 until 2016. These lower prices are also responsible for slowing device spending growth in general, and PC and tablet spending growth in particular.

Gartner forecasts that worldwide enterprise software spending will total US$296 billion in 2013, a 6.4% increase from 2012. This segment will be driven by key markets such as security, storage management, and customer relationship management. However, beginning in 2014, markets aligned to big data and other information management initiatives, such as enterprise content management, data integration tools, and data quality tools, will begin to see increased levels of investment.

The global telecom services market continues to be the largest IT spending market. Gartner analysts predict that growth will be predominately flat over the next few years, as revenue from mobile data services compensates for the decline in total spending for both the fixed and mobile voice services markets. By 2016, Gartner forecasts that mobile data will represent 33% of the total telecom services market, up from 22% in 2012.

Worldwide mobile phone sales to end-users totaled 1.75 billion units in 2012, a 1.7% decline from 2011 sales, according to Gartner. By the end of Q1 2013, smartphones will account for more than half of all mobile phones shipped worldwide according to Gartner. Data from Q4 2012 revealed that smartphone shipments hit a record high of 44% of the overall mobile phone market of 472 million. With smartphone numbers growing by almost 40% year on year every quarter, while shipments of so-called feature phones drop by around 20% in the same period, that would put smartphones substantially ahead of feature phone shipments—at 286 million against 211 million—during the first quarter of 2013. Samsung dominated both the mobile phone and smartphone markets, shipping a total of 107 million units globally in the final quarter of 2012, of which about 64 million were smartphones. Nokia was the second-largest player, accounting for 85 million shipments, while Apple was third with 43.4 million shipments. Apple and Samsung together accounted for 52% of the smartphone market, up from 46.4% in the third quarter, according to Gartner.

Gartner added that Samsung’s resources and ability to build a broad market reach are advantages that no other competitor can easily match. However, the competition will intensify in 2013 as players such as Sony and Nokia improve. With Samsung commanding more than 42.5% of the Android market globally, and the next vendor at just a 6% share, the Android operating system is being overshadowed by Samsung’s brand, with the Galaxy name nearly a synonym for Android phones in consumers’ minds.

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Further reading on the Information Technology industry


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