Despite some global economic uncertainty, companies around the world continue to spend more and more on IT. According to a new forecast from Gartner, total IT spending this year will reach just over $3.9 trillion – an increase of 3.4 per cent compared to 2019. And in 2021, spending is expected to exceed $4 trillion (twelve zeros after the four).
‘Although political uncertainty pushed the global economy closer to a feared recession, it did not occur in 2019 and is still not the most likely scenario for 2020,’ said John-David Lovelock, research director at Gartner, when the analysis giant presented its forecast.
According to Gartner's forecast, corporate IT spending on cloud-based solutions will grow much faster than spending on ‘traditional’ IT through 2022. Software will be the fastest growing market this year, reaching double-digit growth of 10.5 per cent – and this growth is largely driven by software as a service (SaaS).
SaaS dominates spending
But even though SaaS will get the lion's share of the spending pie, Gartner still expects spending on non-cloud-based types of software to increase, albeit at a slower pace. Licence-based software will still be purchased by companies, and according to Gartner, its use will increase slowly until 2023 – even though it is clear that the cloud will take over in the longer term.
"Last quarter, companies faced the dilemma of simultaneously reducing costs and investing in growth. Maturing cloud environments are one example of how this dilemma can be resolved. Organisations can now expect a greater return on their cloud investments through clear cost savings, improved flexibility and innovation, and better security. This is a trend and development that will continue," said John-David Lovelock.
The market for public cloud services is growing
It is therefore clear that an increasing proportion of total IT expenditure is moving to the cloud. In 2020, the market for public cloud solutions will be worth $140.4 billion, an increase of 15.5 per cent compared with 2019.
All regions are investing more in the cloud, but the United States still accounts for over half of total global spending on cloud solutions. The United Kingdom ranks second, with 8 per cent of total IT budgets spent on public cloud services (IaaS) alone, which will amount to $16.6 billion in 2020.
In the EMEA region, total spending on public cloud services will reach $57.7 billion in 2020, up from $50 billion in 2019.
Strong dollar affects the rest of the world
The headwinds that can be discerned are linked to the strong dollar, which has had a negative impact on certain regions and discouraged companies there from increasing their IT spending on, for example, devices and data centre equipment.
Gartner points out that mobile phone spending in Japan, for example, will decline this year due to rising local average selling prices as a result of the strengthening US dollar. The UK's expenditure on computers, printers, servers and even external storage systems is also expected to decline by 3 per cent, according to Gartner's forecast.
In the last quarter of 2019, the device market saw the sharpest decline across all segments, but despite this, the market will return to overall growth in 2020. Gartner predicts a $10 billion increase in IT device spending, driven primarily by the adoption of new, lower-cost phone options in China and emerging markets in Asia and the Pacific.
Europe picks up speed again
Europe, which has seen a slowdown in IT investment over the past three years, partly due to the Brexit debacle and the falling pound, is now expecting a year of recovery, according to Gartner. For example, spending on enterprise software in the EMEA region is expected to increase by 9.2 per cent in 2020 – with SaaS alone accounting for 17.7 per cent growth during the year.
Europe, which has seen a slowdown in IT investment over the past three years, partly due to Brexit and the falling pound, is now expecting a year of recovery, according to Gartner. For example, spending on enterprise software in the EMEA region is expected to increase by 9.2 per cent in 2020 – and SaaS alone will account for 17.7 per cent growth during the year.
Gartner points out how declines in both the euro and the British pound against the US dollar in 2019 put pressure on some IT spending and caused an increase in local prices for technology hardware. However, in 2020, the Brexit issue is expected to reach a final resolution and the pressure on exchange rates is expected to ease.
New laws also increase expenditure
Compliance with new and stricter legislation on data integrity and security, primarily through the GDPR but also through changes in other trade policy and intellectual property rights, has also meant that many organisations have increased their investments in IT security. In 2019, security spending increased by 9.3 per cent, and in 2020 it will increase by a further 8.9 per cent.
