Public cloud to buck bleak IT spend trend in NZ

Public cloud to buck bleak IT spend trend in NZ

The initial estimated growth of ICT spend in NZ was 9.6 per cent pre-pandemic

Credit: Photo by Aakanksha Panwar on Unsplash

Public cloud is set to be one of the bright spots in the New Zealand market, bucking a broader trend that is expected to see the country weather a 6.3 per cent decline in ICT spending in 2020. 

The ICT spend in New Zealand this year is expected to reach the equivalent of roughly US$9.5 billion, according to new analysis by data and analytics firm GlobalData. 

While the initial estimated growth of ICT spend in NZ was 9.6 per cent before the COVID-19 pandemic struck, the latest estimates put growth in negative territory to the tune of 6.3 per cent. 

Indeed, an analysis of GlobalData’s Market Opportunity Forecasts Model reveals that ICT spending across all infrastructure segments, which includes hardware, services and software will decline as enterprises defer their purchase decisions.

“Even for the few enterprises that are looking to maintain their pre-outbreak upgrade timelines, the COVID-19 outbreak has caused supply chain constraints that will affect the availability of hardware,” Global Data senior technology analyst Gopi Srikanth said. 

“The market for ICT services in New Zealand too will decline in 2020, as enterprises revisit their buying decisions owing to an increased focus on profitability amidst the uncertainty.”

These anticipated declines come largely as a result of other sectors being hit by disruptions. The consumer goods sector alone, which accounted for 9.2 per cent of the overall ICT spend in 2019, is expected to witness a 13.2 per cent decline in ICT spend in 2020.

But there is some good news on the horizon too, especially for cloud players. 

“A few segments, however, including public cloud (comprising [software-as-a-service] SaaS and [platform-as-a-service] PaaS) will continue to grow as enterprises in New Zealand leverage public cloud to effectively manage their processes such as the recovery of data and safe backup systems,” Srikanth said.

“Similarly, the market for enterprise social networking and collaboration platforms is set to increase by 22.5 per cent in 2020, owing to the demand for collaboration due to remote working requirements.”

However, the demand for software as a whole is expected to fall as enterprises delay the roll-out of applications, with nearly all products and solutions categories anticipated to see reduced demand this year, compared to projections before the pandemic.

“In the short-term, the domestic ICT market will see increased demand for cloud computing and collaboration tools suited for the remote working models to ensure business continuity,” Srikanth said. 

“The long-term recovery is, however, expected to be primarily driven by accelerated digital transformations in verticals such as consumer goods, manufacturing, government, transport and logistics over the next four years. 

GlobalData expects demand for mobility software, smart chatbots, delivery apps, and artificial intelligence software to grow during the forecast period 2019-2024, which should provide a significant boost to the New Zealand ICT market,” Srikanth added.

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