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Home Technology

COVID recovery reveals a downward trend in IT spending

FutureCIO Editors by FutureCIO Editors
April 18, 2023
Photo by PhotoMIX Company from Pexels: https://www.pexels.com/photo/documents-on-wooden-surface-95916/

Photo by PhotoMIX Company from Pexels: https://www.pexels.com/photo/documents-on-wooden-surface-95916/

For the fifth consecutive month, IDC has lowered its 2023 forecast for worldwide IT spending as technology investments continue to show the impact of a weakening economy. In its new monthly forecast for worldwide IT spending growth, IDC projects overall growth this year in constant currency of 4.4% to $3.25 trillion. This is slightly down from 4.5% in the previous month's forecast and represents a swing from a 6.0% 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 of 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."

After reductions to PC forecasts a month ago, IDC has now scaled back its expectations for some additional hardware categories including servers, wearable devices, and peripherals. Forecasts have been reduced for on-premises infrastructure investments by enterprise buyers, while cloud and service provider deployments remain more resilient overall.

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. 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.

Stephen 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."

Stephen Minton

For the first time, this month's Worldwide Black Book forecast includes channel splits in the March 2023 update. 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-premises infrastructure and PCs are facing difficult market conditions this year," said Minton.

He concluded that 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 is reinforcing the general sense of resilience which the industry still enjoys.

Related:  Oracle to open second cloud region in Singapore
Tags: IDCpost-COVIDpost-pandemic recovery
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