AI maybe on everyone's lips, but it's not what's driving IT spending

Software expected to top $1 trillion next year, according to analysts

In the face of continuing economic uncertainty and geopolitical conflict, spending on computer software continues at a staggering pace, forecast to grow 13.5 percent in 2023.

This is according to the latest figures from Gartner, which said growth would continue into next year: after hitting $912 billion globally in 2023, software spending is expected to increase another 14 percent in 2024 to top $1 trillion.

This is against a backdrop of increasing worldwide IT spending, projected to total $4.7 trillion in 2023, an increase of 4.3 percent from 2022. The estimate for the current year is up slightly on the $4.5 trillion figure projected by Gartner in January.

Speaking to The Register, John-David Lovelock, distinguished vice president analyst at Gartner, claimed IT spending - aside from devices - was more or less recession-proof.

IT consulting had grown at 20 percent worldwide in 2022, "which we didn't see coming," he said.

Meanwhile, software is driving growth across the sector, Lovelock said. Cloud-based software is on track to expand 20 percent annually but even on-premise software was increasing at a respectable rate of between 4 and 6 percent.

Absent from user spending, though, was the much-hyped investment in AI. "Artificial intelligence, of course, has a big play," Lovelock said. "But when it comes to the apps area, AI in one sense is consumingly the most interesting thing going on, and alternately, the least important thing in the way of IT spending."

While it remained the center of the hype cycle, it was vendors who were spending most on developing AI, and the necessary tools around it, rather than end user organizations. Like sugar on breakfast cereal, AI is being sprinkled on a bit of everything by vendors, he said.

"Every IT vendor has to have a story around AI this year, but they don't necessarily need to have a product. They at least have to have a story of where it's going to go, when it's going to be coming out, what it's going to be doing and how great it's going to be. The trick with the AI sprinkling is that it may not actually drive price change. We will start seeing end users choosing vendors who have better AI over vendors who have less AI or no AI. That's not going to change how much they spend."

Microsoft yesterday announced a $30 per month AI subscription for Microsoft 365 for enterprise users. Adding a subscription to Copilot might up monthly prices by up to 83 percent.

For his part, Lovelock likened the addition of AI features in applications to the introduction of spell checkers in early word processing. At first, they were a paid add-on, but soon they would become an integrated feature of every product users barely thought about.

Gartner's numbers show a spread of trends in IT spending. While spending on devices is expected to contract by 8.6 percent this year, down to about $700 billion worldwide, the category will see growth return with a 6.9 percent expansion next year. Similarly, Gartner sees spending on datacenter systems contracting this year (-1.5 percent), but will expand at 8.1 percent next year to reach $235.5 billion. ®

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