Dive Brief:
- Global IT spend is projected to contract 8% in 2020, stymied by the coronavirus pandemic, according to a Gartner forecast released Wednesday. IT spend is expected to hit $3.4 trillion this year, down from $3.7 trillion in 2019.
- Gartner expects IT priorities to move away from projects aimed at growth or transformation, in favor of mission-critical technology that supports operations. While companies may pause large-scale cloud projects, public cloud services is expected to grow 19% this year, according to the forecast.
- In industries hard-hit by the pandemic, such as entertainment and travel, recovery to pre-pandemic IT spending levels could take up to three years, Gartner said.
Dive Insight:
While many industries entered 2020 with a growth mindset, the protracted effects of the lockdown made IT leaders quickly shift gears. Disruption touched everything from PC shipments to software developer's productivity.
While Gartner began the year expecting 3.4% growth year-over-year, the new numbers expect IT spend to shrink, as company priorities are redrawn almost in real time.
The direct cause behind the contraction isn't directly related to the pandemic, but rather the public health interventions that came with it, according to John-David Lovelock, distinguished research VP at Gartner.
"The lockdowns caused a revenue uncertainty across the board," said Lovelock in an interview with CIO Dive. "CFOs don't know how much money the company's going to make this year."
Gartner's forecast aligns with the economic and tech spending scenario Forrester projected was most likely, according to its April research. The scenario, which Forrester said had a 60% likelihood, would see tech budget spending drop 9% this year and 5% in 2021, aligning with an economic contraction through this year.
Faced with cash flow constraints, cash-strapped CIOs begin to go down a predictable checklist for IT savings, Lovelock said:
- Discretionary spending on devices will stop
- New projects won't get signed off on
- Consumption-based contracting gets curtailed
- Vendors with large revenue amounts are approached for concessions on price
- Canceling ongoing projects that don't return on cash
- Cutting data server equipment
- Layoffs
Because 2020 revenues will be less than expected in December, CIOS "are going to have less money to spend this year," while tasked with the same, if not more, expectations, said Lovelock.
IT spend in harder-hit industries such as travel and entertainment will be the last to regain pre-pandemic IT spending levels. "Even when the lockdown is over, it's not like people will rush back to those industries," Lovelock said.
In this context, Gartner expects digital transformation to gain more relevance, with the use of digital business ecosystems; automation, including artificial intelligence and RPA; and location-agnostic work quickly becoming the norm.
"We can't go back to the analog way of doing things," Lovelock said. "We're not gonna have the number of employees we used to to make the same amount of revenue."
