Does Your IT Budget Reflect The World At Large?

February 3, 2025 Timothy Prickett Morgan

Sometimes, numbers are so large they become almost meaningless. If I say $1 trillion or $5 trillion to you, do you really have a sense of it except relatively to some other number in the same order of magnitude? You can feel the change, but you can’t feel the actual magnitude of the actual number?

It is with this in mind that we turn to the latest forecasts for IT spending from Gartner, which shows a slight acceleration in the rate of spending increase from 2024 to 2025, but ironically, shows the absolute figures for IT spending in those two years being smaller in the most recent forecast than in the earlier one from last fall.

Last fall, as we wrote back in early November, Gartner said that IT spending would come in at $5,259.8 billion in 2024 and would rise by 9.3 percent to $5,747.3 billion. In its latest casing of 2024 spending and its forecast for 2025, Gartner is saying that there was only $5,114.8 billion spent on IT hardware, software, and services worldwide in 2024, which is a reduction of $145 billion – several times the size of IBM’s revenues in 2024, to give that some perspective. And now it is projecting that IT spending will hit $5,617.8 billion in 2026, which is $129.5 billion less in spending than the forecast Gartner did back in November.

What this tells you, we guess, is to have your budget gauged to the spending increase, not on the relative spending amounts, of the IT market at large.

What we find amazing is how much spending on GenAI infrastructure is warping overall spending in the datacenter. In 2023, datacenter systems spending was up by 4 percent to $236 billion, but grew by 39.4 percent to $329 billion last year. The expectation is that it will grow by another 23.2 percent in 2025 to $406 billion, and based on some back of the envelope math we did on the Gartner numbers, it will be somewhere around $590 billion by 2028.

“IT services companies and hyperscalers account for over 70 percent of spending in 2025,” said John-David Lovelock, distinguished vice president analyst at Gartner who puts together its spending forecasts in a statement accompanying the figures above. “By 2028, hyperscalers will operate $1 trillion dollars’ worth of AI-optimized servers, but not within their traditional business model or IaaS Market. Hyperscalers are pivoting to be part of the oligopoly AI model market.”

$1 trillion in AI systems. That’s 1,000,000 $1 million machines. Or 1,000 $1 billion machines. The latter is more likely, as it turns out. Or maybe even 100 $10 billion AI machines, now that we think on it.

As we have pointed out many times, you should probably see how your IT spending maps to the averages for the world. If you think you are running a little light, you can use the general trend to argue for more spending in, say, hardware or software, depending. The point is that your IT shop has to continue investing in the future or it will get stuck in the past, in the La Brea tarpits of technical debt. And that will limit the optionality of the company you work for, and therefore its future – and yours with it.

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