Global IT spend to shrink by 7% in 2020

Global IT spend to shrink by 7% in 2020

Spending to hit US$3.5 trillion, with the communications sector accounting for more than a third

Credit: Dreamstime

The global IT industry is expected to shrink by 7.3 per cent followed by a “swoop” recovery, according to Gartner.

New findings from the analyst reveal the worldwide industry’s spending will reach US$3.5 trillion in 2020, with all segments facing a decline amid the COVID-19 pandemic.

The device sector will take the biggest brunt of organisations’ IT cost cuts, with the market shrinking by 16 per cent to US$597 billion.

Although working from home caused a temporary spike in device sales during the initial stages of the pandemic, expenditure is not expected to return to its peak of US$711 billion in 2019.

The communications sector will see the smallest shrink, falling by 3.3 per cent from US$1.372 trillion to US$1.326 trillion.

Spending in data centre systems will meanwhile fall by 10 per cent from US$210 billion to US$188 billion, as IT services shrinks by 6.8 per cent to roughly US$969 billion.

Aside from communications, the enterprise software industry will see the softest tumble, with spending lowering by 5.7 per cent to US$450 billion. 

However, there is hope to be had as Gartner claims that while the majority of economic growth is going to take a “swoosh” uplift,  IT’s recovery will be more of a “swoop” shape.

“Overall IT spending is still expected to sharply decline in 2020 but will recover in a faster and smoother manner than the economy,” explained John-David Lovelock, distinguished research vice president at Gartner. “Still, enterprises cannot return to previous processes that are now rendered outdated due to the disruption of their primary revenue stream during the pandemic.

“From movie theatres to banks, COVID-19 is forcing all organisations to get creative and stay afloat without exclusively offering physical experiences. Specifically, CIOs with less immediate cash on hand should plan on becoming more digital than they had originally anticipated at the start of 2020.”

According to the report, customers will have a backlog of IT projects and less cash to use for them as the world emerges from the pandemic.

The situation will mean demand for subscription products and cloud services rises, as customers look to lower upfront and capital expenditure costs. 

One bright spot will be the infrastructure-as-a-service (IaaS) market, which is expected to grow 13.4 per cent to US$50.4 billion in 2020 and 27.6 per cent to US$64.3 billion.

At the same time, ongoing COVID-19 lockdowns will keep the cloud collaboration and video conferencing industry in god shape, fuelling “sustained growth” throughout 2020.

According to Gartner, this area is projected to grow by almost half in 2020. “With the easing of lockdown restrictions, many enterprises will soon return to a higher level of revenue certainty allowing some cash flow restrictions to ease and CIOs to resume spending on IT again,” said Lovelock. 

“This pause and restart will push growth out of 2020 and into 2021. The smooth ‘swoop’ recovery of top line IT spending masks a very turbulent recovery across some countries, industries and markets.”

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