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Like nuclear fusion, funding of IT on the basis of revenue generation is just around the corner, Gartner says
Spending up while growth slows, as business app investment leads the charge
EMEA – that zone of planet Earth existing only in the heads of business executives – is set to see total IT spending hit $1.3tn in 2022, up 4.7 per cent from 2021, according to Gartner.
Growth in spending is set to slow compared with 2021's forecast, when EMEA IT spending is estimated to grow by 6.3 per cent.
Remote work was not something that many wanted to do in April 2020. But, overall, a billion new people went home to work in 2020
Spearheading growth would be enterprise software, set to increase by 10 per cent to hit £178bn next year, followed by IT services at 8.2 per cent growth, with spending reaching £388m. The laggard was the "devices" category, which will only climb by 0.7 per cent, a dramatic fall from the 13.7 per cent growth indicated for 2021, according to Gartner.
John Lovelock, distinguished research vice president at Gartner, told The Register that since the beginning of the pandemic, businesses have been signing off IT spend ahead of revenue expectations.
"Remote work was not something that many wanted to do in April 2020. But, overall, a billion new people went home to work in 2020. Bringing people back in a hybrid work environment may not be something that businesses want to do but they have to.
"Companies have seen those that completed their digital journey in 2020, overall, had better business performance, resiliency and revenue, so spending on IT is happening now ahead of revenue, even ahead of revenue expectations. In some cases, it's about gaining revenue. In the near future: transforming who we are, being a viable business in this new post-pandemic world; in some cases, is just about survival," Lovelock said.
Money for the IT crowd... is on the way
Lovelock argued this also created a shift in how IT was financed in a move away from merely supporting the business, towards, "being the business." That means different calculations. Rather than business looking at IT spending in terms of cost of operations, they would look at it in terms of the cost of revenue or the cost of goods sold, Lovelock said.
Annual earnings statements from 2020 supported the idea that companies that had already completed – or partly completed – digital transformation were doing better, he said.
"It is a game of catch-up for those that have not been investing. For some, it's going to be doubling down on the idea that IT is a sinkhole for cost, but for most, there is this acknowledgement that they have to start digitally transforming, whether that's on their internal processes, in supply chain resiliency, dealing with partners or customers, for the most advanced, digitally transform their value proposition," Lovelock said.
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The growth in enterprise software spending was really about the cloud, which is a "systematic shift," according to Gartner. It was "stealing money from other lines" in that it avoided spending on servers, networking, and storage and so on. Applications, business intelligence and supply chain software were also pushing cloud spending, Lock said.
Enterprise cloud spending is set to represent 12.5 per cent of total enterprise IT spending in 2022, with infrastructure as a service (IaaS) and desktop as a service (DaaS) growing at the fastest rate.
UK IT spending was set to beat the average for EMEA – that region encompassing a great deal of economic, geographic, and cultural diversity. Gartner expects UK IT spending to reach $223.3bn in 2022, up 6 per cent from 2021, compared with 4.7 per cent growth for total EMEA IT spending in 2022.
Although it has a larger economy than the UK, Germany spends less on IT; it is expected to spend $167.3bn in 2022, a 4.4 per cent increase on last year.
In the UK, Brexit has shifted some spending to business IT, but consumer markets had seen the opposite effect, Lovelock said. ®