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Gartner thinks enterprise IT will be immune to recession
Tech dept still wearing halo from saving companies in lockdown... plus cloud committers 'can't cut that spending'
Despite the abundance of geopolitical uncertainty and darkening economic clouds, global IT spending is projected to hit $4.6 trillion in 2023, up 5.1 percent from 2022, according to Gartner's latest forecast.
So sanguine is the omnipresent IT analyst giant on the tech spending outlook, it increased growth estimates for spending next year, with growth up from the 3 percent it originally expected for 2021 to 2022.
US inflation hit 8.2 percent in September, despite the Federal Reserve increasing interest rates. A survey of economists now predicts a recession is a near certainty in the US.
While the crushing effects of rising interest rates on consumer spending will hit personal tech hard, an 8.4 percent decline in 2022 and 0.6 percent hit expected in 2023 — enterprise IT spending is set to continue with its relative boom, according to Gartner's projections.
Their figures contend that spending on datacenter systems, for example, will hit $216.3 billion in 2023, up 10.4 percent on this year. IT services spending will hit $1.36 trillion in 2023, up 4.2 percent, software, which includes spending on cloud services, will increase 8 percent to reach $879.3 billion in 2023.
John-David Lovelock, Gartner distinguished VP analyst, told The Register that cause for optimism was justified by IT departments having few options to cut discretionary IT spending, and something of a halo effect around IT departments since the pandemic hit.
"In 2020, the US went into a recession, which according to the Bureau of Labor Statistics was three times deeper than 2009. IT spending in the US went up. When we look at where there are discretionary line items within overall enterprise IT spending budgets, there's very little: it's in the 5 percent range.
"We look at the things that are non-discretionary: long-term outsourcing contracts, managed service contracts, cloud spending on infrastructure as a service, platform as a service or software as a service. You know, once you're on that cloud bandwagon, you can't cut that spending," he said.
It was IT that saved most companies' bacon in 2020
At the same time, because corporate IT held up relatively well during the pandemic, business leaders and finance chiefs were looking at IT departments for solutions going into the recession, and offering commensurate budgets.
For example, a July 2022 Gartner survey of more than 200 CFOs found that 69 percent plan to increase their spend on digital technologies, while the 2023 Gartner CIO and Technology Executive Survey found that CIOs are being tasked with accelerating time to value on digital investments.
"It was IT that saved most companies' bacon in 2020. We had 300 million people globally, working remotely in March 2020, and we had 1.2 billion people working remotely by the end of April. IT did that. It allowed online ordering and supply chain fulfillment and all the other bits and pieces that were required to keep the business running through a pandemic and through those public health interventions,” Lovelock said.
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"IT was the solution, not only for the corporate problems but to departmental level problems, and CIOs have been wearing a bit of a halo ever since. Now that we're looking at a potential downturn, cashflow constraints, producer price indexes climbing as high as they have, CFOs are going back to CIOs for solutions," he said.
But businesses that do struggle are going to find that, since the shift to the cloud, they are in less control of their IT spending.
“With software licenses, you could for a year cut maintenance off and still run software, you can't do that with the cloud. This was something that Gartner was writing about and warning people of back in 2010 and 2012. The more people turn over to cloud, the less control they're going to have over their non-discretionary budget,” Lovelock said.
Despite the difficult economic outlook, struggling businesses are not likely to get a sympathetic ear from cloud providers when it comes to pricing.
"It has been in some cases a moot point, but when your cloud provider raises prices, you really don't have much of an option. Switching out is long, complicated, and very expensive, so the prices have gone up a fair amount,” he said. ®