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New Zealand to get off lightly as COVID-19 hits global IT spend

New Zealand to get off lightly as COVID-19 hits global IT spend

New Zealand spend expected to drop by 7.3 per cent, compared to the global decline of 8 per cent

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While declines in IT spending are expected around the world, New Zealand’s forecast for 2020 is expected to fare better than the global figure.

This is according to recent data from research firm Garter, which predicted a decline in New Zealand IT spending of 7.3 per cent, to $12.6 billion, compared to the global decline of 8 per cent, to US$3.5 trillion.

Breaking down New Zealand’s IT spending forecast, expenditure on devices is predicted to take the biggest hit with a decline of 15.6 per cent, to $1.6 billion.

This is followed by data centre spending, which is expected to be down by 14.3 per cent to $347 million. Next, communication services are anticipated to be down by 7.2 per cent to $4.7 billion; and IT services are forecast to be down 4.8 per cent to $3.8 billion, while enterprise software is expected to be 3.8 per cent to $2.1 billion.

Just like in New Zealand, the global device market is also expected to be hardest hit with a decline in growth of 15.5 per cent down to US$590 billion.

Data centre systems spending, meanwhile, is expected to see a decline of 9.7 per cent to US$191.1 billion, then IT services, with a forecast decline of 7.7 per cent to US$952.5 billion, enterprise software with a fall of 6.9 per cent down to US$426.3 billion and then communication services with a decline of 4.5 per cent down to US$1.3 trillion.

The cause of these widespread declines is squarely due to the coronavirus pandemic, which is causing CIOs to prioritise mission-critical spending over growth opportunities, according to John-David Lovelock, chief forecaster at Gartner.

“CIOs have moved into emergency cost optimisation which means that investments will be minimised and prioritised on operations that keep the business running, which will be the top priority for most organisations through 2020,” he said.

“Recovery will not follow previous patterns as the forces behind this recession will create both supply side and demand side shocks as the public health, social and commercial restrictions begin to lessen.”

In order to recover from these declines, Lovelock claimed that previous strategies will be ineffective.

“IT spending recovery will be slow through 2020, with the hardest hit industries, such as entertainment, air transport and heavy industry, taking over three years to come back to 2019 IT spending levels,” he said.

“Recovery requires a change in mindset for most organisations. There is no bouncing back. There needs to be a reset focused on moving forward.”

One sub-market segment expected to see growth, however, is public cloud services, which overlaps with multiple market segments, by an estimated 19 per cent in 2020.

Other areas set for growth include cloud-based telephony and cloud-based conferencing at 8.9 per cent and 24.3 per cent, respectively.

Lovelock added the levels of cloud spending Gartner predicted for 2023 and 2024 could be seen as early as 2022.

 

 

 


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