Gartner Inc. is warning vendors to prepare for a global decrease in IT spending that it blames on economic uncertainty and currency fluctuations.

The gloomy prediction was posted yesterday, with Gartner predicting that global IT spending will fall by 0.5 percent this year to $3.49 trillion, compared with the $3.5 trillion spent last year.

Many organizations have to carry out a balancing act between fiscal caution and the need to invest in IT hardware, software and services.

“There is an undercurrent of economic uncertainty that is driving organizations to tighten their belts, and IT spending is one of the casualties,” said John-David Lovelock, a Gartner research vice president, in a statement. “Business leaders know that they need to became digital businesses or face irrelevance in a digital world. To make that happen, leaders are engaging in tough cost optimization efforts in some areas to fund digital business in others.”

It’s a delicate balancing act, Gartner warns, with many companies taking the savings they’ve made from optimizing legacy systems and using that to invest in new digital initiatives. According to Lovelock, many organizations are being forced to optimize as a first step because revenue growth isn’t enough to sustainably invest in new digital projects.

Such optimization usually consists of redirecting spending from IT assets to IT services such as the cloud, Gartner said.

As such, Gartner believes that spending on IT services will actually grow this year. It predicts a 2.1 percent rise in spending to $929 billion a year in this segment, which is great news for cloud players but less than welcome for legacy vendors.

Gartner said telecom service spending would take a hit, declining by two percent to $1.4 trillion, though spending on mobile data is likely to increase thanks to improved pricing on bandwidth and the growing availability of 4G/LTE networks. Data center system spending will also grow slightly, rising by 2.1 percent to $175 billion for the year. Enterprise network equipment purchasing in particular, is said to be a bright spot.

However, any gains in the data center will be offset by a worldwide reluctance to spend money on devices, particularly smartphones. The global device market, worth $650 billion a year according to Gartner, will decline by 3.7 percent in 2016.

“The smartphone market is approaching global saturation, slowing growth,” Lovelock said.

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