Inflation Pumps Up Global IT Spending, Supply Chain Deflates It
May 23, 2022 Timothy Prickett Morgan
This is not a newsflash, but it is a bit crazy out there on Earth right now. Predicting what spending will be in any industry and for any durable good or service is extremely difficult. But, prediction is what humans do, and the prognosticators at Gartner have done their best to try to figure out where IT spending is going to go in the next two years.
As far as they can tell, global IT spending actually rose by a remarkable 9.5 percent to $4.26 trillion in 2021, with spending being particularly brisk for software and devices (which includes PCs, smartphones, and tablets). Spending on IT services was a little bit faster than the overall market, whole spending on datacenter systems (servers, storage, and switching gear) brought down the average a little and spending on communications services brought down the average by quite a bit. But all categories grew.
Some of that growth was due to inflation, some was due to currency fluctuations relative to the U.S. dollar, and some of it was due to an actual increase in capacity and capability.
Here is how spending by category looks, according to Gartner:
As you can see from the table above, IT spending is expected to cool in 2022, and again, the cooling is going to happen across all categories, but the devices are expected to decline quite a bit. (Which is not a surprise, considering a lot of us bought a new PC during the coronavirus pandemic to work from home.) Spending is expected to be a little weaker for datacenter systems in the coming year, growing by only 5.5 percent but still faster than the average. Communications services – all those corporate and consumer data plans added up – is going to be particularly weak, and as it represents nearly a third of the total IT spending worldwide, this weakness is driving down the average across all IT spending.
“This year is proving to be one of the noisiest years on record for CIOs,” John-David Lovelock, distinguished research vice president at Gartner, said in a statement going over the projections. “Geopolitical disruption, inflation, currency fluctuations, and supply chain challenges are among the many factors vying for their time and attention, yet contrary to what we saw at the start of 2020, CIOs are accelerating IT investments as they recognize the importance of flexibility and agility in responding to disruption. As a result, purchasing and investing preference will be focused in areas including analytics, cloud computing, seamless customer experiences, and security.”
Despite all of our worries about rampant inflation, it doesn’t look like Gartner is expecting abnormal growth in IT spending in 2023 – at least not yet. There is some elevation in the cost of IT services in its model for 2022 and 2023 as the higher costs of IT talent is hitting the market, but it is not anything like the inflation we are seeing in our personal lives for food and gas. The expectation is for overall IT spending to rise by 5.5 percent in 2023 to $4.67 trillion.
The core thing we always look at is the combination of datacenter systems and software. In 2022, these two categories together are expected to grow by 8.1 percent to $893.5 billion, and in 2023, together they will grow by 10.3 percent to $985.2 billion. By 2024, this core of the IT market will break through $1 trillion in total spending worldwide for the first time.
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