While spending in the device sector is expected to decrease due to the economic downturn, overall IT spending is expected to continue to rise this year as software (SW) and IT service spending increases exceed this. In the midst of this, it is reported that dependence on and spending on IT services will increase further due to the shortage of skilled workers and rising labor costs, and the related market is expected to expand.

Market research firm Gartner has announced that global IT spending this year will reach a total of $4.6 trillion, up 5.5% from last year. Despite the ongoing global economic turmoil, it is predicted that IT spending will increase in all regions of the world in 2023.

In 2023, software and IT services spending are expected to show the highest growth rates, reaching $891.3 billion and $1.3641 trillion, respectively, growing 12.3% and 9.1% year-on-year. The growth rates for 2024 are also expected to be 13.1% and 10.2%, respectively, indicating that this is a sector where market expansion is expected.

This is despite the device growth rate showing a downward trend of minus 4.6%, and the increase in spending in other sectors outpacing it, leading to an increase in overall spending.

“Despite macroeconomic headwinds, digital transformation has not slowed,” said John-David Lovelock, research vice president at Gartner. “With stagnant GDP growth and high inflation expected in many countries through 2023, IT spending will remain strong.”

He also said, “CIOs are working to leverage digital technologies to transform their companies’ value propositions, revenue and customer interactions while optimizing spending.”

The software sector is expected to see double-digit growth this year as companies prioritize spending to gain competitive advantage through productivity improvements, automation and other software-driven innovation initiatives. In contrast, the device segment is expected to decline by nearly 5% year-on-year as consumers postpone device purchases due to decreased purchasing power and lack of purchase incentives.

Gartner analyzed that “As enterprises struggle to navigate the ongoing economic turbulence, the gap between ‘sustaining’ and ‘business-driving’ technologies is becoming more evident, centered on the overall average IT spending growth rate.”

“CIOs are faced with a balancing act, as evidenced by the polarized nature of IT spending,” Lovelock said. “For example, in the data center market, there is ample spending to maintain existing on-premises data centers, but new spending is moving toward cloud options, as evidenced by the growth in spending in IT services.”

The IT services sector is set to continue its growth through 2024, driven by the infrastructure-as-a-service market, which is expected to grow by more than 30% this year. This is the first time that price, rather than simple usage growth, is the primary driver of spending growth in the cloud services sector.

The failures of Silicon Valley Bank, Signature Bank and Credit Suisse, which influenced investment trends in the global economy, sent shockwaves through the banking and technology industries. The damage was relatively minor, but it forced tech startups to present a new vision to stakeholders, customers, and potential customers.

“This is not just a technology issue, because these companies lend money to all types of startups, not just IT,” Lovelock said.

“Tech CEOs must immediately ensure and ensure their organizations are moving forward by taking steps to preserve working capital, monitor the impact of cash, ensure access to credit, and monitor talent and culture,” he said. “Once their organizations are prepared, tech CEOs can then direct and lead their people to explore, accelerate, and execute on market opportunities.”

While layoffs continue to reverberate across the tech industry, there is still a critical shortage of skilled IT workers. The demand for tech talent far outstrips supply, and this trend is expected to continue through at least 2026, according to the IT spending outlook.

“Tech layoffs don’t mean the IT talent shortage is over,” Lovelock said. “IT spending on internal services is slowing across all industries, and companies are not keeping up with wage increases,” he said. “As a result, companies will spend more to maintain fewer workers and rely on IT service providers to fill the gap.”