Technology

Gartner Cuts 2023 IT Spend Growth Projection to 2.4%

A device spending reduction and minimal growth in data centers and communication services will cause IT spending to grow less than initially forecast.
Gartner Cuts 2023 IT Spend Growth Projection to 2.4%
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Three months after Gartner forecast that worldwide spending on information technology would grow 5.1% in 2023, it has revised its projection. Gartner slashed its overall spending growth forecast a little more than half, to 2.4%. It now projects $4.5 trillion of IT spending this year.

The research firm lowered the growth forecast in every major product category: data center systems, software, devices, IT services, and communication services. The largest chunk of spending will come in the communications services and IT services categories. 

Spending on devices is the only IT category in which Gartner anticipates a contraction (5.1%) in 2023. The cause is consumers and enterprises lengthening device refresh cycles, according to Gartner. 

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“During the height of the pandemic, employees and consumers had technology refreshes of tablets, laptops, and mobile phones due to remote work and education,” said John-David Lovelock, distinguished VP analyst at Gartner. “Without a compelling reason for an upgrade, device assets are being used longer, and the market is suffering.”

Shipments of PCs, in particular, saw big drops in the fourth quarter of 2022 (down by 29%) and for all of 2022 (down by 16%). Gartner doesn’t expect the enterprise PC market to return to growth until 2024.

Outlays for data centers and communications services will see less than 1% growth this year, said Gartner. 

“A turbulent economy has changed the context of business decisions and can cause the chief information officer to become more hesitant, delay decisions, or reorder priorities,” said Lovelock. “We’ve seen this in action with the reshuffling taking place among some B2B companies, especially those that over-invested in growth.”

A turbulent economy has changed the context of business decisions and can cause the chief information officer to become more hesitant, delay decisions, or reorder priorities. — John-David Lovelock, Gartner

Despite a global economic slowdown (and a potential recession), enterprises will continue to spend on digital business initiatives, said Lovelock. Gartner expects software spending to grow the most in 2023, at 9% (compared with 7% in 2022), followed by IT services at 5.5%.

As software spend continues to rise, companies are going to have to hire outside IT staff for implementation and support, Gartner predicts. The intense competition for IT talent is making it challenging for CIOs to hire skilled internal staff.

In fact, the most skilled IT professionals are leaving positions in IT departments and taking jobs at technology and service providers, said Lovelock, which typically have the resources “to keep up with increased wage requirements” and offer “better development opportunities and career prospects.”

CFOs — who have the ultimate say on cloud spending — will need to become more cloud-savvy to ensure their organizations are making the right deployment and financial decisions. — Helena Schwenk, Exasol

Gartner’s IT spending forecast is in line with the AICPA’s fourth-quarter economic outlook survey of 550 CPAs, released late last year. As CFO reported, executives surveyed by the AICPA estimated their companies’ increase in IT spending “to ease a bit from a 3.4% pace to a 2.7% rate of increase” in 2023.

According to Helena Schwenk, vice president of the chief data and analytics office at Exasol, businesses will have to do more with less when it comes to IT budgets this year, even in the cloud. That includes cutting back or optimizing cloud programs “to only the essentials” and leveraging “more economical services with fewer hidden costs.

“CFOs — who have the ultimate say on cloud spending — will need to become more cloud-savvy to ensure their organizations are making the right deployment and financial decisions when it comes to the cloud at a time where every penny counts,” Schwenk said in an email.