IT spending forecasts slashed

Published on the 18/03/2020 | Written by Heather Wright


Analyst predict IT spend_ESG report

AI, cloud and servers were on the spend list, but now analysts aren’t so sure…

What a difference a month can make.

Enterprise Strategy Group’s recently released 2020 Technology Spending Intentions survey painted a picture of a world where IT organisations were gearing up for budget increases and eyeing up AI, cybersecurity and public cloud infrastructure services as budget growth areas.

And it wasn’t all about the newer technologies either. While 64 percent of recipients were gearing up for an AI spending increase, and 58 percent were expecting the same for cloud infrastructure services, servers were also making the cut – with 35 percent saying they expected a spending increase this year.

“Businesses that can shift technology capacity and investments to digital platforms will mitigate the impact of the outbreak.”

Network infrastructure (40 percent) and business applications (39 percent) were also in for spending increases for some according to the ESG report. (Just 13 percent of those surveyed expected a spending cut for servers – it was the category with the largest number of respondents expecting a decrease in spend.)

Roll forward just a couple of weeks and analysts – if not necessarily businesses themselves – are in downgrade mode, slashing their spend expectations, though some IT areas are likely to see growth (thank you remote working) and there’s the hope that some businesses will take the downtime to play technology catch-up.

Despite that, the latest forecasts make for somewhat glum reading.

IDC last week slashed its 2020 IT spending forecast, warning that the escalating Covid-19 crisis was already impacting IT markets as buyers and vendors adjust to a new set of assumptions and a new global economic reality.

The analyst firm is now warning that a ‘pessimistic scenario’ could see IT spending drop back to one percent growth for the year, compared with the previous forecast of more than four percent.

Worldwide IT spending was originally forecast to grow by just over five percent in constant currency this year, with IDC forecasting that strong sales in Q4 of 2019 would give way to a smartphone upgrade cycle driven by 5G and a recovery for service provider spending on infrastructure. Momentum around digital transformation projects was also expected to ensure strong demand for software and IT services.

Those New Year predictions quickly gave way to the reality of the growing coronavirus scare as the virus began disrupting first supply from China, then wider supply chains, trade and business confidence.

Still, IDC’s February Black Book still remained positive, with a downgraded growth forecast of 4.3 percent.

It’s a figure, however, that IDC admits is likely to drop closer to three percent this month and which, in that ‘pessimistic scenario’ – which IDC said was based on the crisis extending beyond Q2 outside China – could see the growth for the worldwide IT market likely to drop back to around one percent. IDC warns that that might not even be the worst case scenario. “Things could get worse, but hopefully not,” Stephen Minton, IDC Customer Insights and Analysis group vice president, says.

Forrester VP and principal analyst Andrew Bartels meanwhile says the odds of a tech market decline this year have gone up to 50 percent.

“In the best case, we are now looking at US and global tech market growth slowing to around two percent in 2020,” Bartels says. “That assumes the US and other major economies have declined in the first half of 2020 but manage to recover in the second half.”

His prediction? Computer and comms equipment spending facing potential declines of five to 10 percent and tech consulting and integration services spending to be flat in a temporary slowdown and down by up to five percent if firms ‘really cut back on new tech projects’.

Bartels says a best case scenario for software spending growth is to slow to the two to four percent range.

It’s a bad news forecast in a world which currently seems full of bad news. But while the squeeze might be on financially – and business uncertainty is certainly high – some are suggesting now is the time to invest.

Sandy Shen, Gartner senior director analyst, says “This is a wake-up call for organisations that have placed too much focus on daily operational needs at the expense of investing in digital business and long-term resilience.

“Businesses that can shift technology capacity and investments to digital platforms will mitigate the impact of the outbreak and keep their companies running smoothly now, and over the long term.”

Gartner is urging companies to expand their digital workplace resources and access, providing new capabilities such as collaboration tools, videoconferencing and document sharing, as needed – ideally with flexible, short-term contracts to accommodate a surge in usage in the short term.

The analyst firm is also calling on businesses to leverage technology to address customer demand, expanding capacity for self-service and digital sales and enabling remote experiences (from remote conferences, to ‘face-to-face’ B2B meetings and telemedicine).

Post a comment or question...

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Follow iStart to keep up to date with the latest news and views...



MORE NEWS: