Global IT Spending Likely to Increase After Years of Sluggish Growth

Global IT Spending Likely to Increase After Years of Sluggish Growth

June 13, 2018 | IT & Telecom Blogs

Over the past few years, global IT spending has been in the doldrums. Due to uncertainties such as Brexit, industrial regulations and currency fluctuations, IT spending took a hit in 2017. However, after years of sluggish growth, investment in IT is set to accelerate, driven by global economic gains and reformed tax regimes. Despite all these economic changes, upcoming contract renewals, aging IT systems and solutions, and spending in technological advancements are expected to bolster the global spending. Regulatory measures governing data such as the European Union GDPR and the China Data Regulation are also expected to impact IT spending.

Segments Within IT Poised to Generate Increased Investments

Unlike other analyst firms that have predicted sharp spending declines of workstations (laptops/desktops) over the coming years, we believe the spending will increase.

  • Windows 10 is one the major factors driving the sales of computing devices. Microsoft’s announcement that it will cease to support Windows 7 by 2020 is expected to push enterprises to refresh their sixth-generation hardware running on Windows 7. Moreover, end-computing processor giants such as IBM and AMD have announced that the sixth-generation processors will not support operating systems outside of Windows 10. Hence, enterprises will have to consider fast-tracking their PC refresh cycles.

The enterprise software segment continues to showcase robust growth, with global software spending expected to increase in the range of 9-11 percent over the next three years, crossing the $500 billion mark. Over the next few years, businesses are expected to increase spending on the software segment, with more of the spend budget shifting to the SaaS mode.

  • Within software budget allocations, security software accounts for the major stack. In the wake of growing cyberattacks, almost 70 percent of the enterprises across the globe have increased their IT spending. If security applications aren’t dynamic in this fast-evolving threat environment, the rate of breaches will continue to increase; hence, data protection and endpoint protection tactics need to evolve.

IT services buyers will be closely involved in redefining category strategies with the influx of digital into their traditional categories and with a new landscape of next-gen technologies:

  • Currently, 13 percent of the overall IT services market is made of consulting, and considering that consulting expertise is essential to implement the components of digital, there will be an urgent need to invest in consulting services as well.

When it comes to traditional outsourcing, the ventures are increasingly getting challenged by emerging/newer revenue streams consolidated under the "Digital" portfolio of services:

  • Within digital, it is automation (and cloud) that is currently the topic of discussion between buyers and service providers.
  • In IT, the maximum focus is on automating non-intelligent, algorithmic and extremely manual processes — most automation deals that are getting inked are in streams such as testing, maintenance and support services.
  • Current automation initiatives mostly cater to cost optimization initiatives — savings agendas dominate enterprise buyers’ mindset rather than value creation.

Spending on cloud services is also set to increase. By 2020, at least one-third of IT spending will be cloud-based, reaching 60-70 percent of all IT infrastructure, software, services and technology spending:

  • CIOs and sourcing managers will increasingly leverage cloud across IT stacks to increase efficiency and meet the requirements of their business units.
  • In the wake of data protection regulations, the need for data localization has evolved as a major trend. To ensure that businesses are compliant with the guidelines, global organizations will increasingly engage with data center service providers that encompass traditional data center outsourcing services, hosting colocation and cloud Infrastructure-as-a-Service subsegments.
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