Rates of inflation, geopolitical disruption, and talent shortages are not expected to slow IT investments
Worldwide IT spending is projected to total $4.4 trillion in 2022, an increase of 4% from 2021, according to the latest forecast by Gartner.
“This year is proving to be one of the noisiest years on record for CIOs,” said John-David Lovelock, distinguished research vice president at Gartner. Geopolitical disruption, inflation, currency fluctuations, and supply chain challenges are among the many factors vying for their time and attention, yet contrary to what we saw at the start of 2020, CIOs are accelerating IT investments as they recognize the importance of flexibility and agility in responding to disruption.
“As a result, purchasing and investing preference will be focused in areas including analytics, cloud computing, seamless customer experiences and security.”
Inflation impacts on IT hardware (e.g., mobile devices and PCs) from the past two years are finally dissipating and are starting to spill over into software and services. With the current dearth of IT talent prompting more competitive salaries, technology service providers are increasing their prices, which is helping to increase spending growth in these segments through 2022 and 2023. Software spending is expected to grow 9.8% to USD674.9 billion in 2022 and IT services are forecast to grow 6.8% to reach USD1.3 trillion
The rise of enterprise application software, infrastructure software, and managed services in the near and long term demonstrates that the trend toward digital transformation is not a one- or two-year trend, rather it is systemic and long-term. For example, infrastructure as a service (IaaS) underpins every major consumer-focused online offering and mobile application, accounting for a significant portion of the almost 10% growth in software spending in 2022.
Gartner expects digital business initiatives such as experiential end-consumer experience and optimization of the supply chain to push spending on enterprise applications and infrastructure software into double-digit growth in 2023.
The Russian invasion of Ukraine is not expected to have a direct impact on global IT spending. Price and wage inflation compounded with talent shortages and other delivery uncertainties are expected to be greater impingements on CIOs’ plans in 2022 but will still not slow down technology investments.
“CIOs anticipate having the financial and organizational ability to invest in key technologies throughout this year and next,” said Lovelock. “Some IT spending was on hold in early 2022 due to the Omicron variant and subsequent waves but is expected to clear in the near-term.
CIOs who keep their eye focused on key market signals, such as the shift from analog to digital business and buying IT to building it, as well as negotiate with their vendor partners to assume ongoing risks, will fare better in the long term. At this point, only the most fragile companies will be forced to pivot to a cost-cutting approach in 2022 and beyond.