Weakening economy prompts IDC to lower forecast on IT spending

Citing the weakening economy, the International Data Corp. (IDC) has reduced its IT spending forecast for 2023. As a result, the marketing intelligence company projects an overall growth this year in constant currency of 4.4% to $3.25 trillion. 

IDC noted that this is the fifth consecutive time that IDC lowered its forecast for worldwide technology investments. ITS latest forecast in IT spending is slightly down from 4.5% compared to the previous month’s forecast and represents a swing from a 6% growth forecast in October 2022.

“Since the fourth quarter of last year, we have seen clear and measurable signs of a moderate pullback in some areas of IT spending,” said Stephen Minton, vice president in IDC’s Data & Analytics research group. “Tech spending remains resilient compared to historical economic downturns and other types of business spending, but rising interest rates are now impacting capital spending.”

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IDC has been scaling back its expectations across all IT sectors including some hardware categories including servers, wearable devices, and peripherals. Forecasts also have been reduced for on-premise infrastructure investments by enterprise buyers, while cloud and service provider deployments remain more resilient overall.

Cloud services

“Service provider spending is still weakening from last year’s highs as the industry adjusts to slower post-COVID growth, but planned investments by cloud and hyperscale providers have broadly held up since last month,” IDC said. “Strong demand for cloud services continues to drive growth despite inflationary pressures but non-cloud spending is set to decline.”

“The most significant impact remains concentrated in consumer markets with consumer IT spending now forecast to decline by 2% this year,” said Minton. “This will be a second consecutive year of declining consumer tech spending, a huge change in fortunes from consumer growth of 18% in 2021. On the other hand, enterprise demand for cloud and digital transformation remains strong despite economic headwinds.”

IDC also included channel splits in its Worldwide Black Book for March. This shows that while direct IT spending is expected to grow by 6.4% overall in 2023, indirect spending through channel providers will increase by just 2.5% as credit tightening affects smaller businesses and consumers in their ability to fund technology investments.

“Resellers that still derive much of their revenue from on-premise infrastructure and PCs are facing difficult market conditions this year,” said Minton. “Meanwhile, cloud infrastructure, software, and services are growing more slowly than a year ago but continue to account for a larger share of total IT spending and are reinforcing the general sense of resilience which the industry still enjoys.”

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