New Stats for IT Spending in 2018

Uncertainties are always around like grey clouds showing up in corners but the sun is shining bright for the moment in the IT industry. Global IT spending is projected to total $3.7 trillion in 2018, an increase of 4.5 percent from 2017, according to the latest forecast by  IT research analyst Gartner, Inc.

What Uncertainties? Last year, IT industry body National Association of Software and Services Companies (Nasscom) has termed Brexit announcement as a phase of uncertainty for the IT industry. However, Nasscom said it saw a mix of challenges and opportunities in the longer term. Some of the near-term ramifications that Nasscom foresaw on the technology and services sector include — a likely decline in the value of the British Pound, which could render many existing contracts losing propositions unless they are renegotiated.

Research Vice President at Gartner, John-David Lovelock says on similar lines, “Global IT spending growth began to turn around in 2017, with continued growth expected over the next few years. However, uncertainty looms as organizations consider the potential impacts of Brexit, currency fluctuations, and a possible global recession.”

“Despite this, businesses will continue to invest in IT as they anticipate revenue growth, but their spending patterns will shift. Projects in digital business, blockchain, Internet of Things (IoT), and progression from big data to algorithms to machine learning to artificial intelligence (AI) will continue to be main drivers of growth,” John added.

Enterprise software continues to exhibit strong growth, with worldwide software spending projected to grow 9.5 percent in 2018, and it will grow another 8.4 percent in 2019 to total $421 billion (see Table 1). Organizations are expected to increase spending on enterprise application software in 2018, with more of the budget shifting to software as a service (SaaS). SaaS removes the expense of hardware acquisition, provisioning, and maintenance, as well as software licensing, installation and support. The growing availability of SaaS-based solutions is encouraging new adoption and spendings across many subcategories, such as financial management systems (FMS), human capital management (HCM) and analytic applications.

Table 1. Worldwide IT Spending Forecast (Billions of U.S. Dollars)

Source: Gartner (January 2018)

The devices segment is expected to grow 5.6 percent in 2018. In 2017, the devices segment experienced growth for the first time in two years with an increase of 5.7 percent. End-user spending on mobile phones is expected to increase marginally as average selling prices continue to creep upward even as unit sales are forecast to be lower. PC growth is expected to be flat in 2018 even as continued Windows 10 migration is expected to drive positive growth in the business market in China, Latin America and Eastern Europe. The impact of the iPhone 8 and iPhone X was minimal in 2017, as expected. However, iOS shipments are expected to grow 9.1 percent in 2018.

“Looking at some of the key areas driving spending over the next few years, Gartner forecasts $2.9 trillion in new business value opportunities attributable to AI by 2021, as well as the ability to recover 6.2 billion hours of worker productivity,” said Mr. Lovelock. “That business value is attributable to using AI to, for example, drive efficiency gains, create insights that personalize the customer experience, entice engagement and commerce, and aid in expanding revenue-generating opportunities as part of new business models driven by the insights from data.”

“Capturing the potential business value will require spending, especially when seeking the more near-term cost savings. Spending on AI for customer experience and revenue generation will likely benefit from AI being a force multiplier — the cost to implement will be exceeded by the positive network effects and resulting increase in revenue,” said Mr. Lovelock.

Gartner’s IT spending forecast methodology relies heavily on rigorous analysis of sales by thousands of vendors across the entire range of IT products and services. Gartner uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data on which to base its forecast.

The Gartner quarterly IT spending forecast delivers a unique perspective on IT spending across the hardware, software, IT services and telecommunications segments. These reports help Gartner clients understand market opportunities and challenges. The most recent IT spending forecast research is available at Gartner Worldwide Spending Forecast. This quarterly IT Spending Forecast page includes links to the latest IT spending reports, webinars, blog posts and press releases.

Mr. Lovelock will provide further analysis on the key drivers of the IT market at the Gartner Tech Growth & Innovation Summit taking place from April 30 through May 2, 2018in San Diego, CA. The Summit is the premier conference for technology vendors to learn about the latest trends and tools, innovation predictions, positioning and thought leadership.

For more information, visit www.gartner.com.