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The latest IT spending forecast from analyst Gartner points to a 2.4% increase in IT spending this year. This figure is down from the previous quarter’s forecast of 5.1% growth. Worldwide IT spending is projected to total $4.5tn in 2023.
In spite of this revised expectation, Gartner’s forecast shows that enterprise IT spending is set to remain strong.
John-David Lovelock, distinguished vice-president analyst at Gartner, said: “A turbulent economy has changed the context of business decisions and can cause CIOs to become more hesitant, delay decisions or reorder priorities. We’ve seen this in action with the reshuffling taking place among some B2B companies, especially those that overinvested in growth. However, IT budgets are not driving these shifts, and IT spending remains recession-proof.”
The software and IT services segments are projected to grow by 9.3% and 5.5% in 2023, respectively. But, as Computer Weekly has previously reported, there is set to be a sharp decline in device spending. Preliminary results from Gartner show that worldwide PC shipments totalled 65.3 million units in the fourth quarter of 2022, a 28.5% decrease from the fourth quarter of 2021.
During strong trading conditions, every business invests in IT, but as economic conditions worsen, when times get tough, Lovelock said: “You tend to spend on things that you feel bring real value, and this is where enterprises start splitting between those that really value IT and see it as something that drives revenue and prosperity, and those that see it as driving costs.”
While the banking crisis and 2009 recession led to organisations moving to the cloud to save money, Lovelock said that this time round the cloud was becoming more expensive, driven by inflation and energy price hikes. He warned that CIOs may be locked into a long-term subscription, where they have paid upfront for cloud services, but if the price of the subscription increases, the upfront payment no longer covers the full term of their subscription.
This issue of IT being a cost centre plays out in the skills market, when CIOs need to compete on wages to attract the best talent. Job vacancy rates have been increasing every quarter and the open jobs per unemployed rate is at a record low in many countries.
Gartner found that high competition for talent is making it challenging for CIOs to hire skilled IT staff, limiting growth for companies that struggle to scale without the requisite talent. In Lovelock’s experience, staff salaries are outside of a CIO’s control and tend to be set by the business. Unlike the tech sector, where tech talent is core to the business, most non-tech organisations are struggling to find the best people.
“CIOs are losing the competition for talent,” said Lovelock. “IT services spending is growing more quickly than internal services in every industry. Skilled IT workers are migrating away from the enterprise CIO towards technology and service providers (TSPs) who can keep up with increased wage requirements, development opportunities and career prospects.”
As a consequence, Gartner expects the IT services market to grow, as companies look to bring in outside IT staff for implementation and support. It forecast that spending on consulting will reach $264.9bn in 2023, a 6.7% increase from 2022.
Lovelock believes this will lead to IT departments having to focus their attention on managing IT suppliers rather than developing core technology competencies in-house.