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Gartner: Software sales defy economic outlook

With spending on IT going up, there is no better time to be a head of IT as software drives new revenue-making opportunities

Gartner has forecast that worldwide IT spending will total $4.5tn in 2022, an increase of 3% from 2021. However, although enterprise IT spending is up, sales of devices have slowed during 2022 compared with 2021. Spending cutbacks on PCs, tablets and printers by consumers led to a 5% decline in devices, according to Gartner.

“Inflation is top of mind for everyone,” said John-David Lovelock, distinguished research vice president at Gartner. “Central banks around the world are focusing on fighting inflation, with overall inflation rates expected to be reduced through the end of 2023. However, the current levels of volatility being seen in both inflation and currency exchange rates is not expected to deter CIOs’ investment plans for 2022. Organisations that do not invest in the short term will likely fall behind in the medium term and risk not being around in the long term.”

Discussing the decline in device spending, Lovelock said that while macro-economic conditions have influenced device sales, behind the figures there is a change in buying habits. “In the consumer space, people are putting their hands back into their pockets,” he said. “Those in the lower income bracket are not buying devices. This year we have seen unit sales down and spending fall, but the average sale price has been going up.”

Gartner’s figures reveal an inflationary effect on products fuelled by supply issues and price increases due to chip shortages. Lovelock said: “The real effect is that the mix of devices sales is changing. Low-end phones are not being purchased, but high-end buyers are still buying high-end phones.”

Sales in software are forecast to grow from $164bn in 2021 to $170bn in 2022 and $182bn in 2023. Lovelock said that, given the potential for recession, the 10.68% increase from 2021 to 2022 forecast by Gartner is non-intuitive, but it demonstrates IT’s importance to business. “IT has gone beyond back-office function,” he said. “It has gone from capex to opex and is now a revenue-generating function. If you want to improve revenue, you spend more on IT.”

Gartner’s data also reveals that price increases and delivery uncertainty, exacerbated by Russia’s invasion of Ukraine, have accelerated the transition in purchasing preference among CIOs, and enterprises in general, from ownership to service – pushing cloud spending to 18.4% growth in 2021 and expected growth of 22.1% in 2022.

Not only is cloud service demand reshaping the IT services industry, but according to Gartner, it is also driving spending on servers to 16.6% growth in 2022, as hyperscalers build out their datacentres.

Spending on datacentre equipment is set to increase from $191bn in 2021 to $212bn in 2022 and $222bn in 2023, and Lovelock described 2022 as “a special year” in the forecast for datacentre spending. “There have been service supply constraints, a server price bump and it has been a watershed year for hyperscalers, who are buying everything they can get their hands on,” he said.

Gartner reported that sales of servers shipped to external service providers grew by 25.4% this year, and sales of servers to businesses have also been on the rise. According to Lovelock, businesses are paying off the technical deficit from when spending was curbed last year. “Businesses are not giving up their on-premise environments,” he said. “Long-term, Gartner sees 2% growth in enterprise servers. However, spending on new initiatives is going to cloud services.”

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