While technology proved crucial in responding to the COVID-19 pandemic, the International Data Corp. (IDC) expects worldwide IT spending to decline by 2.7% in constant currency terms this year.
The global health emergency forced governments to lockdowns disrupting businesses and putting the brakes on economies. Companies may have to resort to rapid cuts to capital spending and budgets previously earmarked for hardware, software, and IT services.
“Businesses in sectors of the economy that are hardest hit during the first half of the year will react by delaying some purchases and projects, and the lack of visibility related to medical factors will ensure that many organizations take an extremely cautious approach when it comes to budget contingency planning in the near term,” said Stephen Minton, program vice president in IDC’s Customer Insights & Analysis group.
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PCs, tablets, mobile phones, and peripherals will experience sales decline “with overall devices spending expected to decline by 8.8% in constant currency terms.” The same fate awaits the server or storage and network hardware (3.3%) even if there is a strong demand for cloud services as a result of the work from home setup in quarantined and lockdown countries and areas. Enterprise network equipment spending will decline by 1.7%.
However, IDC said total infrastructure spending (including cloud) will increase by 5.3%, but all of this growth will come from enterprise spending on infrastructure as a service (IaaS) and cloud provider spending on servers. Overall server/storage hardware spending will be down by 3.3%.
Slight growth on software
“Hardware spending, in general, is always identified for rapid spending cuts during any economic crisis, as a means for enterprises to quickly protect short-term profitability,” said Minton. “In previous economic crashes, IT hardware has tended to overshoot the economic cycle on both the downside and in the recovery phase. That’s because underlying demand drivers don’t change overnight, but the timing of purchases is shifted and delayed, and this can now be done even more quickly than in the past. What’s different now is that cloud is a bigger factor than it was in any previous global recession, and this should mean that overall spending is less volatile than in the last two major IT spending downturns.”
Software will experience a bit of positive growth with 2% overall with the demand for cloud services growing as companies resort to remote work and operations.
“There will be pockets of opportunity for software and related services during the next six months, as organizations create response measures focused around increased remote work and collaboration,” said Minton. “Organizations that are further along the digital transformation and cloud migration scales are likely to be best-positioned in terms of integrating these technologies into effective and agile response plans.”
Including telecom and other spending, total ICT spending will decline by 1.6% to just under $4.1 trillion. This compares to overall ICT growth of 3.5% last year when IT spending increased by almost 5%. Telecom spending will be less impacted overall, as demand for broadband remains extremely strong (in some cases, higher as a result of increased working from home and isolation measures).