CIOs’ investment plans are not expected to be deterred by inflation or currency volatility.
Worldwide IT spending is projected to total $4.5 trillion in 2022, an increase of 3% from 2021, according to the latest forecast by Gartner, Inc. In India, IT spending is projected to total $114.9 billion in 2022, growing 7.7% from last year.
While IT spending is expected to grow in 2022, it will be at a much slower pace than 2021 due to spending cutbacks on PCs, tablets and printers by consumers, causing spending on devices to shrink 5% worldwide.
“Inflation is top of mind for everyone. Central banks around the world are focusing on fighting inflation, with overall inflation rates expected to be reduced through the end of 2023. However, the current levels of volatility being seen in both inflation and currency exchange rates is not expected to deter CIOs’ investment plans for 2022,” said John-David Lovelock, distinguished research vice president at Gartner. “Organizations that do not invest in the short term will likely fall behind in the medium term and risk not being around in the long term.”
Price increases and delivery uncertainty, exacerbated by the Russian invasion of Ukraine, have accelerated the transition in purchasing preference among CIOs, and enterprises in general, from ownership to service — pushing cloud spending to 18.4% growth in 2021 and expected growth of 22.1% in 2022. Not only is cloud service demand reshaping the IT services industry, but it is also driving spending on servers to 16.6% growth in 2022, as hyper scalers build out their data centers.
Spending on data center systems is forecast to experience the strongest growth of all segments in 2022 at 11.1%. Cloud consulting and implementation and cloud managed services are expected to grow 17.2% in 2022, from $217 billion in 2021 to $255 billion in 2022, helping to drive the overall IT services segment to 6.2% growth in 2022.
Global economic uncertainty continues to be an area of concern for Indian enterprises. Indian IT spend is expected to maintain robust 7.7% growth (current currency) in 2022 as compared to 2021 growth rate of 21.2% (see table 2).
“Ongoing investment on hyperscale data centers coupled with average selling price (ASP) increase is forecast to drive 13.6% revenue growth for data centers in 2022. Digitization and application modernization will trigger software refresh including ongoing SaaS adoption,” said Naveen Mishra, senior director analyst at Gartner.
“Cloud services is the underpinning driver for an impressive 10.3% IT services growth in 2022 as CIO’s embark on their multi-cloud strategy. Consumer spending is tightening with high inflation coupled with supply constraints which leads to modest 6.6% growth for devices in 2022.”
IT Talent Crunch is Affecting IT Spending
The critical IT skills shortage being felt across the globe is expected to abate by the end of 2023 when the corporate drive to complete digital transformations slows down and there has been time for upskilling and reskilling of existing staff. However, in the near term, CIOs will be forced to take action to balance increased IT demand and dwindling IT staffing levels.
The IT labor market continues to tighten, making it difficult to attract and retain talent. The Gartner Global Labor Market Survey of nearly 18,000 employees in the first quarter of 2022 showed compensation is the No. 1 driver for IT talent attraction and retention. Technology service providers are increasing prices on IT to allow for competitive salaries. This is driving an increase in spending in software and services through 2022 and 2023. Worldwide software spending is expected to grow 9.6% to $806.8 billion in 2022 and global spending on IT services is forecast to reach $1.3 trillion.
“Additionally, CIOs are using more IT services to assist in the lack of skilled IT staff. Tasks that require lower skill sets tend to be outsourced to managed service firms to alleviate staff time, while critical strategy work, which requires high-end skills unobtainable by many enterprises, will increasingly be fulfilled by external consultants,” said Lovelock.