Tech spending is still going up. Here's where the money is going
Times are changing fast, but analysts at Gartner are forecasting IT spending will still grow in 2023, even though it will be by less than previously expected.
Enterprise Software
Just three months ago, Gartner distinguished VP analyst John-David Lovelock heralded enterprise IT spending as "recession-proof" because chiefs of industry were increasing IT budgets. The economic turbulence brewing in October was "not projected to materially impact the overall level of enterprise technology spending," Lovelock said.
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But as big tech companies have started cutting jobs, Gartner has now published a lower forecast of 2.4% growth over 2022 in enterprise IT spending. It's dialed back the $4.66 billion projection for 2023 to $4.49 billion.
Gartner now also estimates 2022 IT spend totalled $4.39 billion, marking a decline of 0.2% on 2021.
Looking forward, the analyst made some predictions about where the money is likely to be invested during the next 12 months: more software and services, less devices.
Lovelock draws a distinction between B2C and B2B IT spending, but reiterated his argument that IT remains recession-proof. B2C companies are laying off staff because of inflation devastating consumer markets, but he insists "enterprises continue to increase spending on digital business initiatives despite the world economic slowdown."
"A turbulent economy has changed the context of business decisions and can cause CIOs to become more hesitant, delay decisions or reorder priorities. We've seen this in action with the reshuffling taking place among some B2B companies, especially those that overinvested in growth. However, IT budgets are not driving these shifts, and IT spending remains recession-proof," said Lovelock.
It remains to be seen whether Gartner's claim that enterprise IT spending is recession-proof will be tested if and when the US and the rest of the world actually enters a recession.
Announcing layoffs on Wednesday, Microsoft chief Satya Nadella said customers that accelerated spending during the pandemic are now looking to "optimize their digital spend to do more with less."
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"We're also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one," Nadella noted.
Even Amazon Web Services reported slower revenue growth in Q3 2022, as well as falling margins. Amazon CFO Brian Olsavsky said Amazon had experienced wage inflation in 2022, particularly in AWS, and higher energy prices. Per CNBC, Olsavsky said in October that AWS had "seen an uptick in AWS customers focused on controlling cost."