What do companies really spend their IT budgets on? The answer may surprise you

Tablets and smartphones grab the headlines but where does the money really go?

As the global economy begins to show signs of recovery, businesses are upping their technology budgets again, with worldwide IT spending expected to hit $3.8tr this year.

That's a 3.2 percent increase from last year according to the forecast from analyst Gartner. "Globally, businesses are shaking off their malaise and returning to spending on IT to support the growth of their business," said Richard Gordon, managing vice president at Gartner.

The raw numbers themselves are gigantic enough to be effectively meaningless: but what's worth noting is how organisations are spending their IT budgets.

Worldwide IT Spending Forecast (Billions of US Dollars)

2013 IT spending2013 growth %2014 IT spending2014 growth %
Datacenter systems
Enterprise software
IT services
Telecoms services

Telecoms services is probably the least discussed (and least exciting) part of the tech budget; it's also the largest, even though it will grow at the modest pace of 1.3 percent this year to hit $1.655tr. Fixed-line voice services continue to decline as businesses and households go wireless and wi-fi - dropping traditional voice calls in favour of voice over IP for example.

As the economic outlook improves IT services buyers are shifting spending from consulting - planning projects - to actual implementation, which should give IT services - the second largest chunk of the corporate IT budget - a healthy 4.6 percent boost to $964bn.

The much discussed devices market (including PCs, ultramobiles, mobile phones and tablets) comes in third place and remains robust - expected to grow 4.4 percent to $689bn, although the analysts note that buyers in smartphone-saturated countries are preferring mid-tier rather than premium phones, while those in emerging countries favour low-end Android basic phones. The traditional PC market continues to shrink as buyers turn to tablets, with price being the primary differentiator for many.

The enterprise software market - the fourth largest chunk - is now the fastest growing segment, predicted to grow 6.9 percent to $320bn. Gartner said this was thanks to the growth of social, mobile and cloud initiatives which are increasing demand for customer relationship management, database management systems (DBMSs), and data integration tools. The analyst said need for data management technologies will see spending on DBMS overtake spending on operating systems to become the largest chunk of the enterprise software market in this year.

Spending on datacentre systems will hit $143bn, according to Gartner, up slightly on last year with cloud and mobility are the biggest demand drivers. It said virtualisation and cloud adoption are generating significant market demand for example, for datacentre Ethernet switches, and the proliferation of mobile devices is continuing to drive significant demand for the wireless LAN equipment market.

By Steve Ranger

Steve Ranger is the UK editor-in-chief of ZDNet and TechRepublic. An award-winning journalist, Steve writes about the intersection of technology, business and culture, and regularly appears on TV and radio discussing tech issues. Previously he was th...