Enterprise IT Spending To Grow 5.1% In 2023, Led by Software & IT Services: Gartner
Software and cloud-driven growth in IT services will continue to be bright spots in terms of enterprise IT capital expenditure in 2023.
Global IT spending will climb to $4.6 trillion in 2023, registering a year-over-year increase of 5.1%. Even as tech stocks continue to drop by margins not seen since the dot com bubble burst, according to Gartner analysts, “enterprise IT spending is recession-proof.”
In 2022, enterprise expenditure on data centers and software, which grew 10.4% and 8%, respectively, was the major driver for the IT sector, followed by IT Services at 4.2%. The consolidated expenditure in 2022 was, however, dragged down by muted spending on devices (-8.4%) and communication services (-1.4%).
Expect to see a reshuffle within the next 12 months, according to the data by Gartner, with capital expenditure on each category, bar devices, slated to grow.
|
Category |
2022 Spending | 2022 Growth | 2023 Spending |
2023 Growth |
|---|---|---|---|---|
|
Data Center Systems |
$209.19 B | 10.4% | $216.26 B | 3.4% |
| Software | $790.38 B | 8% | $879.62 B |
11.3% |
|
Devices |
$739.98 B | -8.4% | $735.39 B | -0.6% |
| IT Services | $1.258 T | 4.2% | $1.357 T |
7.9% |
|
Communications Services |
$1.435 T | -1.7% | $1.469 T | 2.4% |
| Overall | $4.433 T | 0.8% | $4.658 T |
5.1% |
The declining spending on devices indicates a high inflation rate despite a hawkish policy adopted by the U.S. Federal Reserve. However, expenditure on devices will increase in percentage terms, meaning a significant chunk of potential customers will buy in 2023 and close the negative gap by as much as 7.8%.
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“Inflation has cut into consumer purchasing power in almost every country around the world. Consumer purchasing power has been reduced to the point that many consumers are now deferring 2022 device purchases until 2023, driving spending on devices down 8.4% in 2022 and 0.6% in 2023,” said John-David Lovelock, distinguished VP analyst at Gartner.
The research and consulting firm cited organizations’ more to the cloud as a significant factor behind the growth in expenditure on data centers will remain just enough to support existing systems. As a result, software expenditure (including on cloud infrastructure) is slated to surge by 11.3% in 2023.
However, IT services will continue to be a bright spot in terms of where organizations will spend (7.9% growth in 2023), while the expenditure on communication services pulls out of the negative growth (-1.7%) in 2022 to 2.4% in 2023.
“Enterprise IT spending is recession-proof as CEOs and CFOs, rather than cutting IT budgets, are increasing spending on digital business initiatives. 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,” Lovelock added.
Gartner’s assessment, which propounds IT expenditure to rebound by half as much as the levels observed in 2021, should come as a relief for the tech sector, wherein the S&P 500 Information Technology Sector Index has slid by 25.65% year-to-date (YTD). The NASDAQ 100 Technology Sector Index declined by 38.34% in the same period.
Lovelock continued, “Companies will use digital technology primarily to reshape their revenue stream, adding new products and services, changing the cash flow of existing products and services, as well as changing the value proposition of existing products and services.”
“This trend has fed the shift from buying technology to building, composing and assembling technology to meet specific business drivers. This shift is foundational to the growth of cloud over on-premises for new IT spending.”
Compared to enterprise IT capital expenditure growth prediction of 5.1%, the SMB IT capex is expected to grow at 6.3% in 2022, according to the SMB IT Spending 2022: New 5-year Priorities, Insights and Opportunities report by Analysys Mason.
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