Where will IT spending flow in 2020?

Where will IT spending flow in 2020?

Enterprise software and IT services are set to surge, but the same can’t be said for the devices market.

Credit: Dreamstime

Global IT spending is anticipated to hit US$3.9 trillion this year, according to analyst firm Gatner, with enterprise software spending anticipated to see the biggest jump in growth, while device growth is expected to go backwards. 

Gartner’s latest forecast suggests this year could see a combined increase of 3.4 per cent, compared to 2019, a boost that is expected to see Global IT spending close in on, or perhaps even surpass, the US$4 trillion point.

In New Zealand, spending on technology products and services is forecast to reach $14.3 billion in 2020, up 5.5 per cent from 2019, and reach almost $14.9 billion in 2021.

Locally, spending on software, IT services, communications services and data centre systems are all expected to rise, while the devices segment is set to fall slightly.

Credit: Gartner

Globally, however, such increases are not likely to be distributed evenly across the various subcategories of offerings within the broader IT product and services palette that partners engage with. 

In terms of year-on-year growth, there is one clear and obvious winner: enterprise software. According to Gartner, enterprise software is expected to enjoy a 10.5 per cent growth, compared to the previous year. This growth rate is expected to see global enterprise software spend reach US$503 billion this year. 

Looking forward, Gartner has forecast the same, 10.5 per cent, year-on-year growth rate for enterprise software spend in 2021, with the total spend expected to top out at US$556 billion. 

In 2019, enterprise software grew more slowly, clocking in at 8.5 per cent, according to Gartner, equating to roughly US$456 billion total spend worldwide.

It should come as no surprise to partners in the IT channel that the bulk of growth in the enterprise software category is coming from large scale adoption of cloud-based software services.

“Almost all of the market segments with enterprise software are being driven by the adoption of software-as-a-service (SaaS),” John-David Lovelock,  distinguished research vice president at Gartner, said. “We even expect spending on forms of software that are not cloud to continue to grow, albeit at a slower rate. 

“SaaS is gaining more of the new spending, although licensed-based software will still be purchased and its use expanded through 2023,” he added.

According to Gartner, growth in enterprise IT spending for cloud-based offerings in general will be faster than growth non-cloud offerings through to 2022. Indeed, organisations with a high percentage of IT spending dedicated to cloud adoption indicates where the next-generation, disruptive business models will emerge.

Lovelock provides a reason as to the increasingly rapid rise of cloud-based spending, suggesting that conflicting needs in the enterprise space are driving organisations to search out new alternatives to solve business problems. 

“Last quarter, we introduced the ‘and’ dilemma, where enterprises are challenged with cutting costs and investing for growth simultaneously,” he said. “Maturing cloud environments is an example of how this dilemma is alleviated: Organisations can expect a greater return on their cloud investments through cost savings, improved agility and innovation, and better security. 

“This spending trend isn’t going away anytime soon,” Lovelock added. 

While enterprise software leaves other IT categories in the dust in terms of annual growth, in good news for many IT service providers the IT services segment is expected to see a marked boost this year and next. According to Gartner, 2020 will see IT services grow, year-on-year, by 5 per cent, to just over US$1 trillion.

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