Companies across the world will cut expenditure on information technology (IT) by 8% in 2020, with the overall IT budget expected to fall to $3.4 trillion, due to the Covid-19 crisis, according to technology research firm Gartner.
In January, the firm had projected that IT spending would grow to $3.9 trillion globally in 2020. Last year, companies spent a total of $3.7 trillion on IT solutions and services.
Additionally, devices and data centre systems will witness the biggest drop in spending at almost 10%, the report said.
However, companies will continue to invest in cloud technologies, as per the report. The overall expenditure projected for the segment for 2023 and 2024 will now be achieved by 2022, it said.
As the pandemic continues to spur remote working, public cloud service is expected to grow at 19% in 2020, Gartner said. Cloud-based telephony and messaging, and cloud-based conferencing will also see high levels of expenditure, growing 8.9% and 24.3%, respectively, it added.
The coronavirus pandemic and the following global economic recession have caused chief information officers (CIOs) to prioritise spending on technology and services that are deemed “mission-critical” over initiatives aimed at growth or transformation, according to the Stamford, Connecticut-based research firm.
“CIOs have moved into emergency cost optimisation. This 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,” John-David Lovelock, vice president of research at Gartner, said.
The decline in IT spending will have far-reaching implications for technology product companies in general and Indian IT services companies in particular, as these system integrator companies implement and run operations for most large enterprises around the world.
In fact, analysts expect the financial year 2020-2021 to be a washout for the Indian IT services industry due to the pandemic-induced recession.
“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,” Lovelock said.
Indian IT services companies like Infosys and its peers expect digitalisation and cloud to help them blunt the impact of Covid-19 induced recession.
“IT spending recovery will be slow through 2020, with the hardest-hit industries, such as entertainment, air transport and heavy industry, taking over three years to come back to 2019 IT spending levels,” Lovelock said.