Tech Insight : ‘Only’ Double IT Spending Growth (To $5 Trillion)

24th January 2024

New research from Gartner has predicted that global IT spending this year will reach $5 trillion and IT spending growth will be more than double that of 2023.

A First – Spending More On IT Than Communications 

In its IT spending forecast, Gartner predicts that the massive $5 trillion global spend means that spending on IT services will surpass communications services spending for the first time.

Spending Growth More Than Double 

Another standout figure from the forecast is that the IT spending growth rate of 6.8 per cent in 2024 will be more than double that of the 3.3 per rate in 2023. These key spending and growth figures (even though the 6.8 figure is less than the 8 per cent forecasted the previous quarter) indicate that despite fears of a slowing IT sector, things are very much looking up for the year ahead.

The Largest Spending Segment 

In fact, Gartner forecasts that with spending on IT services is expected to grow 8.7 per cent this year in 2024, reaching $1.5 trillion, IT services spending will become the largest segment of IT spending, even above that of the communications and software sectors.

Gartner says the reason for this IT services growth is mainly due to enterprises investing in organisational efficiency and optimisation projects as these types of investments could be crucial during this period of economic uncertainty.

For example, as John-David Lovelock, VP Analyst at Gartner explains it: “Adoption rates among consumers for devices and communications services plateaued over a decade ago. Consumer spending levels are primarily driven by price changes and replacement cycles, leaving room for only incremental growths, so being surpassed by software and services was inevitable.” 

What About AI?

Although generative AI is essentially the next industrial revolution, it is still relatively new and hasn’t made much impact on near-term IT spending. Gartner suggests that the reason for this is that it “blindsided organisations and boards,” meaning that CIOs are being cautious with their spending.

Therefore, it’s likely that 2024 will be the year of planning for Generative AI, but IT spending will be driven by more traditional forces e.g., profitability, labour, and “a wave of change fatigue”. 

What Is ‘Change Fatigue’ ? 

Change fatigue refers to the resistance or passive resignation that employees may feel towards organisational changes, leading to symptoms such as apathy, resistance, passive resignation, frustration, and burnout.

The thinking is that pandemic-related disruption to work in recent years, combined with factors like turbulent economic conditions, rapid digitisation, and the sheer volume of changes have led to employees’ ability to cope with change dropping to 50 per cent of pre-pandemic levels.

Gartner attributes the fact that the overall IT spending growth rate for 2023 was 3.3 per cent, only a 0.3 per cent increase from 2022 to “fatigue among CIOs”. 

Could Lead To Change Resistance 

It is thought that one of the effects of change fatigue is that it could have a negative effect on IT spending by causing “change resistance” among CIOs, i.e. CIOs hesitating to sign new contracts or to commit to long-term initiatives, or to take on new technology partners. This change fatigue and resistance may mean that CIOs will be looking for higher levels of risk mitigation and greater certainty of outcomes before committing to new initiatives.

MSP Budgets Up Due To Surging Demand 

Another indicator of a healthy IT sector in 2024 is given by new research from ETB Technologies which shows that MSP budgets are up a massive 70 per cent due to surging enterprise demand. The research, based on the answers of 250 leading MSP figures on current trends around spending, found that 80 per cent have increased their spending and 67 per cent have doubled their budget size.

The research attributes these figures to the impact of world events in recent years, e.g. the pandemic, Brexit, geopolitical and economic turbulence, climate change, and supply chain disruptions, leading to an “almost universal shift” towards a hybrid cloud-based strategy. This type of cloud strategy is where an organisation uses a mix of on-premises, private cloud, and public cloud services with orchestration between the platforms. This is likely to be more preferred in these uncertain times because it allows businesses to balance the need for security and control with the flexibility and scalability of cloud services (and it’s cost effective).

What Does This Mean For Your Business? 

As highlighted in Gartner’s forecast, although the IT sector has a healthy outlook with a doubling of growth in the IT spending rate, economic uncertainty is leading to enterprises investing in organisational efficiency and optimisation projects. This, in turn, is one of the main reasons why IT services spending is set to surge this year (higher than communications spending). Although the AI revolution is bringing massive change, it seems the fact that it may have ‘blindsided’ CIOs means that it won’t account for a large amount of IT spending this year, but 2024 will be a year for AI planning instead. This means that IT spending in 2024 will be driven by more traditional forces.

However, the issue of change fatigue among IT spending decision-makers does look set to make them more cautious and could have a downward effect on IT spending this year. This could mean that organisations need to work on trying to understand the factors contributing to change fatigue and employing targeted strategies to help alleviate the adverse effects. On the upside in the world of MSPs, surging demand for hybrid cloud-based solutions is necessitating major increases in budgets and spending.

Overall, 2024 looks like becoming a good year for IT services spending and although the AI revolution is here, we’re still more at the planning than spending stage, so it’s a case of waiting a little longer before AI makes a major impact in spending figures.