IT spending will drop 8% as Covid-19 hits enterprise wallets

IT spending will drop 8% as Covid-19 hits enterprise wallets

Gartner forecasts spending on data centre systems will be hit hardest in 2020

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Gartner has revealed that IT spending across the globe is projected to total US$3.4 trillion in 2020, a decline of eight per cent from 2019 due to the impact of the Covid-19 pandemic.

In January, the analyst firm had forecast worldwide IT spending to total $3.9 trillion in 2020, an increase of 3.4 per cent from 2019.

Gartner’s new forecast says all market segments from enterprise software to communications service will experience a decline in 2020, with devices and data centre systems experiencing the largest drops in spending.

“CIOs have moved into emergency cost optimisation which means that investments will be minimised and prioritised on operations that keep the business running, which will be the top priority for most organisations through 2020,” said David Lovelock, distinguished research vice president at Gartner.

“Recovery will not follow previous patterns as the forces behind this recession will create both supply-side and demand-side shocks as the public health, social and commercial restrictions begin to lessen. Recovery requires a change in mindset for most organisations. There is no bouncing back. There needs to be a reset focused on moving forward.”

The study wasn’t all bleak, however, and noted that  remote working will grow, and public cloud services will be a bright spot in the forecast, growing 19 per cent in this year. Cloud-based telephony and messaging, and cloud-based conferencing will also see high levels of spending growing 8.9 per cent and 24.3 per cent, respectively.

“In 2020, some longer-term cloud-based transformational projects may be put on hiatus, but the overall cloud spending levels Gartner was projecting for 2023 and 2024 will now be showing up as early as 2022,” Lovelock stated.

Growth in ERP, robotic process automation, analytics

A separate Gartner survey this month of 161 finance executives showed that 24 per cent of them anticipate more spending on robotic process automation (RPA), 20 per cent anticipate more spending on cloud-based ERP technologies, and 19 per cent anticipate more spending on advanced analytics.

“Covid-19 shifted the way work is done by most organisations overnight. Companies are now operating in remote environments, with less staff to run key processes, and under immense cost pressure," said Alexander Bant, practice vice president, research, for the Gartner Finance Practice. "This has resulted in companies moving more quickly to the cloud, applying more robotics to their processes, and exposing the need for advanced analytic technologies to plan effectively in this environment."

Cisco sees investment now to be ready for a Covid-19 rebound

Gartner’s findings are backed up by large industry players such as Cisco, Arista, Juniper and others who have recently reported earnings impacts from Covid-19.

Industry bellwether Cisco for example said this week its third-quarter revenue was off eight per cent from a year ago at $12 billion. It also forecasted an additional revenue decline between 8.5 per cent and 11.5 per cent for its next quarter.

Cisco CEO Chuck Robbins did point to a number of areas where the company expects to see continued investment by customers despite current conditions. This includes education as schools at all levels prepare for fall classes.

“As one of the heads of one of the biggest systems in the United States told me, they used anything and everything they could to get students online back in March and now they need to go step back and actually build the real robust long-term architecture that they need, and we're working with them to do that,” Robbins said.

“I think telehealth is here finally and I think that's going to change forever." Like schools, he said he expects medical organisations to build more robust infrastructure for telehealth as opposed to what was cobbled together to get them through the past few months.

Robbins also noted the pharmaceutical firms and drug manufacturers are “working to beef up their infrastructure for all the research, building up their cyber infrastructure for obvious reasons.”

“So there is a lot of things that are going really well, but then again you have industries that are at the heart of this crisis who I wouldn't expect to make significant investments until we get to the other side,” Robbins said.

Robbins also said he’s seen a lot of customers not at the centre of this crisis looking to upgrade aged equipment and using the pandemic as a wakeup call to modernise their infrastructure.

Some CEOs say they will never be this unprepared again, "and if there is a [Covid-19] Wave 2 coming in the fall, many of them may say we need to work on a lot of this right now,” Robbins stated.

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