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STAMFORD, Conn., April 6, 2023 – Gartner, Inc., a leading research and advisory company, has forecasted a 5.5% global increase in IT spending in 2023, amounting to a total of $4.6 trillion. This growth is expected to occur despite the ongoing global economic instability, with all regions worldwide predicted to experience positive increase in IT spending growth. It is also predicting that the IT spending will increase by 8.6% to US$5.04 Trillion.
John-David Lovelock, Distinguished VP Analyst at Gartner, stated that the macroeconomic challenges are not hindering digital transformation. He emphasized that increase in IT spending will remain robust even in countries with near-flat GDP growth and high inflation rates in 2023. Lovelock highlighted the importance of prioritization for CIOs as they aim to optimize spending while leveraging digital technology to transform their company’s value proposition, revenue, and client interactions.
High Growth in Software
The software industry is experiencing a significant boom this year as more enterprises recognize the value of investing in technology to improve their business operations. With the increasing emphasis on digital transformation initiatives, businesses are prioritizing software solutions that can help them streamline their processes, automate tasks, and increase efficiency.
There is a growing recognition among business leaders that software can provide a competitive advantage in today’s fast-paced market. By implementing advanced software solutions, companies can optimize their operations, improve customer experience, and reduce costs, all of which can translate into higher profits and growth opportunities.
In contrast, the devices segment is projected to experience a decline in the coming years, largely due to changing consumer behavior and economic factors. As consumers face economic uncertainty and declining purchasing power, they are likely to delay device purchases and hold onto their current devices for longer periods. Additionally, with the lack of significant new features or incentives to upgrade, consumers may be less motivated to invest in new devices.
Overall, the software industry is poised for strong growth, while the devices segment faces some challenges in the coming years. As businesses continue to prioritize digital transformation initiatives, the demand for software solutions is expected to remain strong, driving innovation and growth in this sector.
Shift to Cloud
In today’s fast-paced and highly competitive business landscape, enterprises are constantly looking for ways to stay ahead of the curve. And with economic turbulence continuing to impact businesses across industries, it has become even more important to make strategic decisions around technology investments. As a result, the division between technologies that are being maintained and those that are driving the business has become increasingly pronounced.
According to industry experts, the split between on-premises data centers and cloud-based solutions is a clear example of this division. While enterprises are still investing in maintaining their existing on-premises data centers, new spending is increasingly being directed towards cloud-based options. This shift is reflected in the growth of IT services, which have become a key driver of overall IT spending growth.
One of the reasons for this shift is the flexibility and scalability that cloud-based solutions offer. With the ability to scale resources up or down as needed, enterprises can more easily respond to changing business needs and market conditions. Additionally, cloud solutions often offer improved security, reliability, and performance, making them an attractive option for businesses of all sizes and industries.
However, the decision to move to the cloud is not always an easy one. There are a number of factors that enterprises must consider, including cost, data privacy and security, and regulatory compliance. Furthermore, migrating to the cloud can be a complex and time-consuming process, requiring significant planning and coordination across multiple teams and departments.
Many enterprises are taking the plunge and making the move to the cloud. Whether driven by a desire for increased agility, cost savings, or improved performance, cloud-based solutions are becoming an increasingly important part of the modern IT landscape. As businesses continue to navigate economic turbulence, it is likely that we will see this trend continue to grow in the years to come.
Growth in IT Services
The IT services segment is projected to continue its growth trajectory through 2024, largely driven by the infrastructure-as-a-service IaaS market, which is expected to reach over 30% growth this year. For the first time, price is a key driver of increased spend for IT cloud services segments, rather than just increased usage. More IT Support Engineers are required to be trained and supporting this growth.
Worldwide Increase in IT Spending Forecast (Millions of U.S. Dollars)
|2022 Spending||2022 Growth (%)||2023 Spending||2023 Growth (%)||2024 Spending||2024 Growth (%)|
|Data Center Systems||216,095||13.7||224,123||3.7||237,790||6.1|
Source: Gartner (April 2023)
Impact of Bank Collapse
The recent collapse of Silvergate Bank, Silicon Valley Bank, Signature Bank, and Credit Suisse has sent shockwaves through the tech industry, leaving many startups worried about the future. While the immediate impact of these collapses remains relatively contained, it is likely that tech startups will face renewed scrutiny from stakeholders, clients, and prospects in the coming months and years.
To navigate these uncertain times, tech CEOs are being advised to take a number of steps to ensure the long-term viability of their organizations. First and foremost, it is crucial to conserve working capital and closely monitor the impact on cash flow. This means making tough decisions about spending and investments, and being prepared to pivot quickly if market conditions change.
In addition, tech startups should secure access to credit and other sources of funding to help weather any future economic storms. This may involve building relationships with alternative lenders or seeking out new investors who are willing to take a long-term view of the business.
Finally, it is important to keep a close eye on talent and culture. As the industry continues to evolve, it will be essential to attract and retain the best talent in order to remain competitive. This means fostering a positive work environment and investing in employee development and training.
The challenges facing the tech industry are significant, there are steps that can be taken to mitigate the risks and ensure long-term success. By staying focused on the fundamentals of good business management and keeping an eye on emerging trends and opportunities, tech startups can continue to thrive even in the face of adversity.
Shortage of Talent for Skilled IT Jobs
Despite ongoing layoffs in the tech industry, there is still a critical shortage of talent for skilled IT jobs. The demand for tech talent greatly outstrips the supply, a trend that is expected to continue until at least 2026 based on forecasted IT spend. Lovelock warned that tech layoffs do not signify the end of the IT talent shortage. He noted that IT spending on internal services is slowing in all industries, and enterprises are not keeping up with wage rate increases. As a result, enterprises will spend more money to retain fewer staff and will turn to IT services firms to fill in the gaps.
Gartner’s IT spending forecast methodology relies heavily on rigorous analysis of sales by over a thousand vendors across the entire range of IT products and services. Gartner uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data on which to base its forecast. The most recent increase in IT spending forecast research is available to Gartner clients in “Gartner Market Databook, 1Q23 Update.”
For more information, please visit the Gartner webinar “Gartner IT Spending Forecast, 1Q23 Update: Uncertainty Has Upset Business as Usual.”
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