The Numbers For Global IT Spending Are Up And To The Right
November 2, 2022 Timothy Prickett Morgan
It is hard to say how much is an increase in investment and how much is inflation, but the numbers for global IT spending are up and to the right, according to the latest forecast from Gartner. For those of you who gauge your spending against that of the rest of the world – and that should be all of you for various reasons – such spending forecasts are as important as they are malleable.
It is hard enough to try to count all of the money changing hands around the world for hardware, software, and services relating to the broad IT market, much less try to convert it all to U.S. dollars and try to extract true IT spending increases from the inflation of costs that as happening all over the world right now. But if you want to argue that your company needs to meet the competition by investing more, such forecasts are ammo for that argument.
We last looked at Gartner’s IT spending forecast back in January, and now we are taking a look at the October update. As a general observation, spending levels in 2020 and 2021 have been adjusted downwards across many categories, and the 2022 figures for spending have been revised downward by less, which has the effect of making percentage budget increases this year (for everything by devices such as PCs, tablets, and smartphones) seem higher than the forecast from January.
It is not surprising that spending is going up, despite the economic and political uncertainty in the world right now, and Gartner said as much.
“Enterprise IT spending is recession-proof as CEOs and CFOs, rather than cutting IT budgets, are increasing spending on digital business initiatives,” explained John-David Lovelock, distinguished vice president analyst at Gartner, in a statement accompanying the figures. “Economic turbulence will change the context for technology investments, increasing spending in some areas and accelerating declines in others, but it is not projected to materially impact the overall level of enterprise technology spending.”
Here is the spending in 2021 and projections for both 2022 and 2023 by category:
Data Center Systems means servers, storage, and networking in the datacenter and any other kinds of appliances used to do various functions. In days gone by, spending on software was always higher than for software, but as you can see, spending on software is nearly four times that of spending on hardware, and there is no reason why this will change as many customers shift from buying software licenses to renting SaaS software on a monthly basis to perform many tasks.
The datacenter hardware spending includes the money spent by hyperscalers and cloud builders to expand their capacity, which they either use to provide advertising supported servers or sell using metered capacity pricing; presumably the IT Services segment includes any revenues that the cloud builders derive from selling that capacity. A proper reckoning of actual hardware spending would add these two numbers together, of course.
If you look at this chart below, you can see that the increase in IT services pretty much maps the increase in software spending, and if hardware tracked along with these, the difference is probably spending on cloud IaaS and SaaS services.
Overall IT spending is fairly steady even with the pandemic. We would love an explanation as to why IT spending dipped in 2015 and 2016, but this is probably due to the shift from on premises to cloud for many applications and from licensing to subscriptions, which has an immediate impact but levels out with an annuity revenue stream over the long haul.