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Solution in the cloud: Brexit triggers IT price hike

According to market observers, Brexit is already having a major impact on IT expenditures in Europe. Companies are moving to the cloud.

01 Dec. 2016 Jörn Brien

Brexit: Hardware spending down

IT spending is impacted by the impending Brexit. (Illustration: Gartner)

Great Britain has not yet left the European Union, but the prospect of Brexit is already impacting IT spending in Europe. Market research firm Gartner forecasts slightly higher IT expenditures in 2016 than the previous year, but this growth will primarily be driven by investments in software and IT services, while hardware spending will drop. This trend should continue in 2017.

According to Gartner's "EMEA IT Spending Forecast", total IT spending in 2016 will rise 0.6 percent to USD 1.23 billion. A healthy 6 percent increase is expected in the software sector (to USD 112.2 million), with IT services also growing fairly strongly, by 3.8 percent (to USD 327.7 million). But companies are apparently tightening their belts when it comes to hardware, with growth down by 3.7 percent (to USD 206.2 million).

In Gartner's view, this is due in part to the impending Brexit and the resulting weakened British pound, which has caused prices for IT products to rise significantly in Great Britain . This is causing consumers and companies to opt for less sophisticated products – causing a drop in sales revenue in the sector. On the other hand, companies in Great Britain are increasingly turning to the cloud. "They're buying computing resources in the form of services instead of servers", explains John-David Lovelock, Research Vice President at Gartner.

IT spending: Banks' Brexit preparations

The trend is likely to grow even stronger next year. In 2017, Gartner predicts a 1.9 percent increase in IT spending to USD 1.26 billion. While software and IT services are expected to grow by 6.8 and 4.1 percent, respectively, spending on hardware will continue to drop – although this decrease will slow to a rate of 0.8 percent. The shift to software and services is particularly apparent in the banking sector, according to Gartner, with banks in France and Germany preparing to move their activities out of London.