Richard Gordon
Research VP
14 years at Gartner
23 years IT industry
Richard Gordon is a research vice president in Gartner Research. He has worldwide responsibility for Gartner's Global IT Market Forecasting. Read Full Bio
by Richard Gordon | May 14, 2013 | Submit a Comment
Hello and welcome to my re-launched Gartner blog (please provide your own champagne and party poppers). This revamp promises more relevant and timely posts, updated bi-weekly (with the occasional guest post), focused on the issues of today and tomorrow that will affect global IT powerhouses, your business and us all as individuals.
With the latest insights on how global economics and market forces are challenging IT vendors and departments to act creatively, I hope you’ll find the new blog a valuable resource during your day’s reading. Please keep the discussions rolling by contributing with comments to help further debate and your own insights into how we can survive and thrive in these uncertain economic times.
Richard Gordon
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by Richard Gordon | May 14, 2013 | Submit a Comment
It’s not every day a political leader has a strand of economics named after him. Japan’s Prime Minister Shinzo Abe’s mix of strong fiscal policy and aggressive monetary moves (which include quantitative easing) has been dubbed “Abenomics”. This strategy for returning Japan to former glories is long overdue. And recent figures show that it seems to be working, with a rise in household spending and jobless numbers at a new low (according to this Reuters article). Growth is expected to reach 2% in the second half of this year, as the latest wave of policies starts to take effect.
According to my colleague George Shiffler, the real action might be happening in the currency. The yen has already depreciated by about 20%, amid accusations of currency manipulation, and the knock-on effects could be considerable. Bringing it back to Gartner, this all has implications for our dollar-based revenue forecasts. Broadly we expect a 2% change in our numbers as a result of currency fluctuations. But for industries tied particularly to Japan, including technology, the shift could be as much as 4%. Worth thinking about…
In the longer term Abenomics’ magic might start to wear off. Alongside huge public debt, plans to raise consumption tax could cut any recovery short. Ultimately, though, Japan’s shrinking, ageing population could present more of a problem than currency fluctuations or fiscal upsets.
For now, though, let’s give a (cautious) welcome to Abenomics, and hope that it helps Japan find its feet again.
Category: Uncategorized Tags: Asia Pacific, IT, Japan
by Richard Gordon | May 14, 2013 | Submit a Comment
In China, state policy is also having a big impact on how things are shaping up. The government has several initiatives to push growth back up to 8%, and one of them is to encourage urbanization. Thousands of rural inhabitants are now taking to the cities, where a labour shortage promises good wages and even disposable income. A large proportion of these migrants will be younger people (aged under 30), and are likely to be big spenders on the latest gadgets. Incidentally, this is something that Gartner has already looked at – see “Market Trends: Rural Workers Will Be the Next Growth Engine for China’s Consumer Technology Market.”
China may have reached the limits of its export-led business model, and will have to encourage domestic demand from consumers – which could tie in neatly with the influx of new moneyed urbanites. But credit is mushrooming, property prices are rising and local government debt is on the up, putting pressure on the banking system. This all sounds very familiar. Indeed, there are signs that, longer-term, China’s economy could be heading for a Western-style crash, or “hard landing”. This will have serious implications for the rest of us. There’s a rather grim irony in there too, which I’m sure won’t be lost on most commentators. Still, for the time being it’s business as usual.
Category: Uncategorized Tags: Asia Pacific, China, IT
by Richard Gordon | May 14, 2013 | Submit a Comment
An additional word about Korea, another Asian region that’s been attracting attention lately, for very different reasons. At the moment the threat of conflict in the region (or the rather more euphemistic “cross exchange”) seems to have subsided. But I couldn’t help thinking when the North was grandstanding that the effect on the region’s industry could be catastrophic.
Some facts: South Korea produces about half of the world’s memory and about a third of its mobile handsets. It is the world’s fifth largest producer of automobiles, its second largest shipbuilder and a major supplier of the chemicals used in plastics. If just South Korea’s chemical industry was affected, the knock-on effect for the semiconductor and mobile industries alone would be calamitous.
One thought occurred to me: compared with the industrial damage caused by another recent disaster to hit Asia/Pacific – the 2011 earthquake and tsunami in Japan – a Korean conflict could well be worse. After the Japanese disaster, electronics production suffered a severe blow, after a crucial supply chain was ruptured, affecting the provision of key semiconductor products (more info here: Best Practices for IT Organizations in Response to the ‘Rolling Blackouts’ Caused by the Japanese Earthquake and Tsunami and Market Trends: How Japanese Electronics Manufacturers Are Addressing the Emerging Postquake Issues ). At the time questions were raised about the risk to the electronics supply chain because of the concentration of critical material and component manufacturing in a particular geography. However, the global electronics supply chain proved to be quite flexible and resilient and electronics production in Japan rebounded relatively quickly, so those questions are no longer uppermost in people’s minds. A crisis on the Korean peninsula could change all that.
All a bit troubling…But I think we’re okay for the time being – fortunately, the probability of a Korean “exchange” is small, and both China and the U.S. have too much at stake to let things get out of control.
Category: Uncategorized Tags: Asia Pacific, electronics supply chain, IT, Korea
by Richard Gordon | May 14, 2013 | Submit a Comment
As the sporting calendar changes to northern summer events with the Champions League and NBA replaced by baseball, cricket and lacrosse, I’m thinking ahead to the next big global sporting events in Brazil. Not only will the World Cup and Olympics provide massive exposure for technology (finally, goal line cameras!) but behind the scenes it gives the country a huge opportunity to boost trade, investment and business.
I see the country’s rush to upgrade its infrastructure around these events as a scrum for all IT players to try to take a piece of this massive economic pie. The expansion of airports and road systems, smart city development in Rio, banking infrastructure and tourism all bring IT opportunities (See Brazil’s IT Boom – DataCenter Dynamics for example), and as China’s growth slows, business is looking for the next big thing with Brazil offering a similar chaotic and vibrant growth curve.
Estimates for the total budget of the two events is $30 billion and while much of this is for construction, every area down the contract chain and in other expanding verticals offers chances for IT to sell services and systems. Outside these two events, I’d expect to see investment flooding into the country dwarfing that amount, with accelerating infrastructure spending despite high inflation concerns. Those concerns may be suppressed by the healthy jobs market and strong consumer activity that will help drive Brazil forward.
On the consumer side, this growth will drive a Samba-like thrust in middle-class spending, with smartphones, computers, tablets and other gadgets in demand, with the requisite broadband and 3G/4G mobile access, at the top of their shopping lists. Are you looking to Brazil?
Category: Uncategorized Tags: Brazil, broadband, consumer devices, economics, IT, Olympics, rio 2016, smart cities, smartphones, world cup 2014
by Richard Gordon | March 28, 2013 | Comments Off
Uncertainties surrounding the prospects for an upturn in global economic growth remain the major retardants of IT growth. Although the U.S. did avoid the fiscal cliff, the subsequent sequestration, compounded by the rise of Cyprus’ debt burden, seems to have netted out any benefit, and the fragile business and consumer sentiment in evidence throughout much of the world continues. However, the new shocks are expected to be short-lived, and while they may cause some pauses in discretionary spending along the way, strategic IT initiatives will continue. In our 1Q13 update to the IT spending forecast, We look for modestly accelerated spending growth of 4.1% in 2013, up from 2.1% in 2012.
The current strength in the devices market was the biggest surprise in this quarter’s update. Here our spending estimates for mobile phones in 2012 have been increased to reflect higher average selling prices (ASPs), commanded by the likes of the popular Apple iPhone and Samsung Galaxy devices at the premium end of the market. We expect this effect to continue into 2013, but longer term, as competition in mature markets intensifies and the contribution to growth from emerging markets increases, spending growth on mobile phones will be hampered by lower ASPs. This short-term fillip to spending on mobile phones has driven an upward revision in device sector growth for 2013 from 6.3% last quarter to 7.9% now, despite flat spending on PCs and a modest decline in spending on printers.
Beyond 2013, our forecast for spending growth now includes 2017. Growth is expected to average a compound annual rate of 3.9% from 2012 through 2017. There are two things going on here.
First, we have the current economic cycle. Since the financial crisis of 2008 / 2009 the global economy has struggled to recover from recession, which has held back business investment and dampened consumer confidence and discretionary spending. We are only now seeing more positive indicators from the important US economy while the Eurozone continues to lurch from crisis to crisis. While there is a sense that a more stable economic outlook is around the corner, until there is a more sustained period of strengthening economic growth it is no surprise that IT spending growth is set to remain modest.
Second we are observing a slowdown in the long-term IT market growth rate as the industry matures; the high-growth phase of the past three decades, which was built on automation and productivity improvement, has come to an end and we won’t see a sustained return to double-digit annual growth in IT spending. Instead, within the context of overall modest growth in top-line IT spending, we’ll see a targeting of IT investment toward strategically important business objectives based on The Nexus of Forces.
The Nexus of Forces — social, mobile, cloud and information — are reshaping spending patterns across all of the IT sectors that Gartner forecasts. Consumers and enterprises will continue to purchase a mix of IT products and services; nothing is going away completely. However, the nature of this mix is changing dramatically and there are clear winners and losers over the next three to five years, as we see more of a transition from PCs to mobile phones, from servers to storage, from licensed software to cloud, or the shift in voice and data connections from fixed to mobile.
IT Spending Forecast, 1Q13 Update: The Nexus of Forces Effect on Spending
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by Richard Gordon | January 25, 2013 | Comments Off
It seems we’ve been talking about the impact of a sluggish economy on IT spending since forever, but the fact remains that uncertainties surrounding the prospects for an upturn in global economic growth remain the major retardants of IT spending growth. This uncertainty has engendered the pessimistic business and consumer sentiment in evidence throughout much of the world.
For the year just ended, we have lowered our expectations for dollar-valued IT spending growth from 1.7% to 1.2%, which reflects a significant reduction in the devices forecast driven by a sharper-than-expected slowdown in the PC market.
Looking ahead to this year, much of the uncertainty surrounding the US and European economies has dissipated (at least for now) and we expect a modest acceleration in IT spending growth in 2013. Indeed, we have revised 2013 growth projections upward from 3.8% last quarter to 4.2% this quarter. However, much of this increase results from projected gains in the value of foreign currencies versus the dollar.
Beyond 2013, with the prospect of a dramatic improvement in the global economy unlikely, our forecast for spending growth remains largely unchanged at a compound annual rate of 3.9% from 2013 through 2106.
For more details on the oultlook for IT spending: http://www.gartner.com/technology/research/it-spending-forecast/
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by Richard Gordon | October 19, 2012 | Comments Off
Next week at Gartner Symposium/ITxpo in Orlando, we will be announcing our latest outlook for worldwide IT spending. A common question I get is, “How do you come up with those forecasts?”
Well, it’s not pure guesswork!
The first step in forecasting any market is to accurately estimate the current market size and Gartner has a long history of compiling detailed technology and service provider revenue data with which to do that. Once we have established a solid historical base we can begin the forecast process.
Gartner’s forecast for worldwide IT spending is actually a “roll-up” of numerous, detailed market segment forecasts across the Devices, Data Center Systems, Enterprise Software, IT Services and Telecommunications Services sectors. In other words, the headline IT Spending growth rate figure is derived from a “bottoms-up” approach that takes into account the latest changes in market outlook across a wide range of technology markets.
Each market segment forecast is based on a specific “market model” that describes the particular dynamics at play in that marketplace. Analysts, who are subject matter experts within each market segment, own these “market models” and the forecast methodology that goes with them. No two “market models”, nor the associated forecast methodology employed, are the same because they are designed to reflect reality in terms of specific market structure and characteristics. What they do have in common, however, is the identification of key influencing factors that determine future market performance. In creating market segment forecasts, Gartner analysts make assumptions about these key influencing factors; when these assumptions change, in aggregate, the forecast changes.
Another important consideration when forecasting fast-moving technology markets is the frequency of update. At Gartner we review and update all our standard IT market segment forecasts every quarter.
We will have more detailed analysis on the outlook for IT spending during our complimentary webinar, “Gartner Worldwide IT Spending Forecast, 3Q12 Update” that we will be hosting on October 23 at 11 a.m. EDT. If you would like to attend the webinar, you can register at http://my.gartner.com/portal/server.pt?open=512&objID=202&mode=2&PageID=5553&resId=2155916&ref=Webinar-Calendar.
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by Richard Gordon | June 29, 2012 | Comments Off
We’ve just updated the global IT Spending forecast and this quarter there’s little change to the growth outlook.
We’ve tweaked the forecast for overall IT spending growth in 2012 up slightly from 2.5% last quarter to 3.0% now, reflecting a fairly steady, albeit gloomy, macroeconomic environment: the Eurozone crisis remains unresolved, the economic recovery in the US remains weak but stable and China’s economy is heading for a “soft-landing” … but at least things aren’t getting any worse!
So, with little change in either business or consumer sentiment in the past quarter, the forecast remains on track for modest growth at least in the short term.
As well as reviewing the forecast assumptions and updating the data, we’ve been busy working on innovations in our forecast coverage.
This quarter we’ve introduced a new, integrated forecast methodology and modeling capability for client devices that gives new insight into how market penetration and usage patterns affect the long-term outlook for PCs, Tablets and Mobile Devices and we’ve re-segmented our IT Services forecast to provide greater insight into the outlook for evolving market segments.
The overhaul of our IT Services coverage has enabled us to produce a new, quarterly-updated Public Cloud Services forecast containing more detail as well as country level coverage for the first time.
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by Richard Gordon | April 5, 2012 | Comments Off
The headlines will say “Gartner Cuts IT Spending Forecast for 2012″ but yet again this quarter our forecast update is a tale of two growth rates: the current dollar one and the constant dollar one.
In our 1Q12 update, worldwide IT spending is forecast to total $3.7 trillion in 2012, a 2.5 percent increase from 2011, which is down from our previous forecast of 3.7 percent growth for this year.
However, the reduction in growth rate has more to do with the recent strength in the U.S. currency than an actual decline in spending. When looking at spending in constant U.S. dollars (i.e. stripping out the effect of exchange rate movements) we project that IT spending is on pace to increase 5.2 percent in 2012, up from its previous projection of 4.6 percent.
What we’re seeing this quarter, as we look forward to 2012, is a bit more stability in the global economic and IT industry environment; the eurozone crisis has abated somewhat, fears about the Chinese real estate bubble have waned and the HDD shortage, while serious, has not caused significant disruption to hardware system spending.
So, the global macroeconomic picture looks a little brighter, as reflected on Wall Street, which is feeding through to more confidence among consumer and enterprises to spend on IT products and services. The one area we see as a growth laggard is the government sector – in fact, we expect global IT spending by governments to contract slightly in 2012 and 2013 as the impact of spending cuts in Western Europe and the USA feed through to the front line.
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