Enterprise software spending will be the driver of IT spending growth next year, turning around a slow year in 2019, according to Gartner analysts.
IT spending around the world is projected to rebound and grow to $3.87 trillion next year, up 3.7% from 2019. This comes on the heels of what’s predicted to be nearly flat growth of 0.4% this year, according to the latest forecast from Gartner.
The forecast, released on Wednesday at the Gartner IT Symposium/Xpo, which runs through October 24 in Orlando, FL, predicted that enterprise software spending will be the main driver of the growth.
“The slowdown in IT spending in 2019 is not expected to stretch as far into 2020 despite concerns over a recession and companies cutting back on discretionary IT spending,” said John-David Lovelock, research vice president at Gartner.
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Gartner analysts say that the complex geopolitical environment has pushed regulatory compliance to the top of organizations’ priority list. Overall spending on security increased 10.5% in 2019, with cloud security projected to grow 41.2% over the next five years. “This is not just about keeping the ‘bad guys’ out,” Lovelock said. “It is also about the expanding need to be compliant with tariffs and trade policy, intellectual property rights, and even with the multiple and sometimes overlapping privacy laws.”
IT spending is forecast to grow 3.5% in 2019, but IT spending in China is expected to grow only 0.1%. “Tariffs do not have a direct effect on IT spending, yet,” Mr. Lovelock said. “Should tariffs extend to devices like PCs and mobile phones, we will likely see manufacturers switch supply routes to minimize costs and have their technology made outside of China.”
The biggest spending decline in 2019 will occur in the device market, down 5.3% from $713 billion in 2018. In 2020, the market is expected to see modest growth of 1.2%. “Similar to how consumers have reached a threshold for upgrading to new technology and applications, technology general managers and product managers should invest only in the next generation of products that will push them closer to becoming a true technology company,” Lovelock said.
IT spending growth is being driven across the globe as many catch up on cloud spending. The US is leading cloud adoption and accounts for over half of global spending on cloud, according to Gartner analysts. In some cases, countries that Gartner tracks lag one to seven years in cloud adoption rates. “For perspective, the country directly behind the U.S. on cloud spending is the United Kingdom, which only spends 8% on public cloud services. An interesting outlier is China, which has the highest growth of cloud spending out of all countries. While China is closing the spending gap, it still will not reach U.S. levels by 2023,” Lovelock said.
Gartner analysts predict that organizations with a high percentage of IT spending dedicated to the cloud will become the recognized digital leaders in the future. “Most companies are caught trying to either cut costs or invest for growth, but the top-performing enterprises are doing both. A core challenge facing the industry is how organizations can operate as both a traditional company and a technology company at the same time,” Lovelock said. “These ‘and’ dilemmas will drive future IT spending trends.”