Gartner Inc. expects worldwide information technology spending to grow 2.4% in 2023, to $4.5 trillion, down from its previous forecast of 5.1% growth, according to a new report released today.
However, the downward revision is more a function of the strong U.S. dollar and weakening demand for consumer devices than an indication that enterprise IT spending is in decline. In constant-currency terms, growth is a healthy 5.4%, Gartner said.
Spending on data center systems, which leaped 12% in 2022, will see the biggest slowdown this year, with growth expected to fall to just 0.7%. Spending on software is expected to jump 9.3%, with IT services growing a healthy 5.5%. Overall IT spending will be dragged down the most by a decline in spending on devices, which more buyers than expected have opted to keep in their pockets rather than replace this year.
“Inflation has gotten into the lower middle class and taken away purchasing power,” said John-David Lovelock (pictured), a Gartner vice president and distinguished analyst. Many people who purchased devices during the early days of the COVID-19 pandemic see no compelling reason to replace them right now, he said. Nevertheless, global device sales of $685 billion reflect the importance of phones and tablets to the overall spending picture.
“If Maslow was drawing his hierarchy of needs today, the top three would be food, mobile phones and rent,” Lovelock quipped.
Data center resilience
The slowdown in spending on data center systems shouldn’t be interpreted as a sign that big on-premises computing environments are going away, Gartner said. “It is not shrinking,” Lovelock said. “Enterprises are continuing to spend what they need to run a data center and on-premises software.”
Hyperscalers and large data center operators went on a spending spree in 2022 and aren’t expected to continue that pace this year, Lovelock said. “The level of spending in 2022 was an aberration,” he said. “The average sales prices were higher, fulfillment in 2021 had been low and a lot of that spending got pushed to 2022.”
Spending on cloud-based software is expected to grow 17% with infrastructure-as-a-service leaping more than 30%. The traditional on-premises software market is shrinking.
The strong dollar has been a headwind to U.S. technology companies that do business overseas and that has impacted global spending as well, Lovelock said. That doesn’t change the fact that, in general, “things are great in the IT world,” he said. “Every country we’re tracking is seeing growth. Overall, IT spending is absolutely recession-proof.”
High job vacancy rates and competition for talent are challenging chief information officers to hire skilled IT staff, Gartner said. Consequently, the IT services market is growing as companies look to bring in outsiders for implementation and support. Spending on consulting is expected to reach $264.9 billion in 2023, up 6.7% from 2022.
“CIOs are losing the competition for talent,” Lovelock said. “Skilled IT workers are migrating away from the enterprise CIO toward technology and service providers who can keep up with increased wage requirements, development opportunities and career prospects.”