Brace yourselves for tech price inflation in Europe, Gartner warns
Gartner has warned CIOs in Europe to prepare for tech price inflation in Europe unless local currencies start performing better against the US dollar.
According to forecasts for 2023, Western Europe will reach $218.7 billion in consumer spending to record the highest growth rate in EMEA. For the current year, the UK is projected to outdo Germany and France in spending by 8 percent. But, that’s in terms of British Pounds. When converted to US dollars the total spending represents a 2.5% decline.
"Because of the weakness of the British pound compared to the US dollar, it translates into an overall decrease in IT spending of 2.5% in US dollars. As such, Western European CIOs need to be wary of price increases from IT vendors," said John Lovelock, VP analyst at Gartner.
"The biggest hindrance right now is the euro to US dollar exchange rate," Lovelock continued. "For devices that are built in US dollars terms, pretty much everything costs more in euros than they do in USD. It's suppressing demand a little, plus there's no big need to refresh right now."
Lovelock advises that when this happens, the CIOs should look to find out the main reason behind the price hike and come up with win-win strategies that also put non-monetary benefits into consideration.
Among affected sectors is public cloud which is projected to increase by a third in Europe next year and a fifth in the US.
On a bigger level, spending in the whole EMEA is expected to inflate 3.7% year-on-year to $1.3 trillion in 2023.
Breaking down the expenditure, datacenter spending is estimated to increase by 1% next year, and software by 8%. In contrast, Gartner estimates that the global spend for datacentres will grow by 3.4%while software will grow by 11.3%.
Lovelock explains that there is a general lack of hyperscale locations in Europe compared with the US and that’s why the region represents the highest demand for data centres.
"Enterprises around the world got rid of some of the technology deficit they had built up in 2020 and 2021. This year, that's happened in Europe. The service providers – the ones that sell colocation, hosting, and cloud platform-as-a-service – are buying as many servers as they can get their hands on. That's the real driver behind server growth this year and next. Europe is underweighted on hyperscale data centres in comparison to the US," he said.