Global IT spending is forecast to decline 0.5 per cent in 2016 with total costs expected to reach $3.49 trillion compared to 2015’s estimate of $3.51 trillion, according to Gartner.
The findings of the latest Worldwide IT Spending Forecast go against Gartner’s forecast last quarter that IT spend would increase 0.5 per cent. The analyst firm claimed the change is mainly due to global currency fluctuations, causing enough economic uncertainty for organisation’s to act cautiously.
The 2016 figure still represents a slowed decline since 2015, during which IT expenditure was cut 6 per cent globally.
In Australia, IT spending is expected to reach almost A$79.9 billion in 2016, an increase in local currency of 2.5 per cent since last year. However, when reported in $US local IT spend was also in decline due to currency fluctuations.
The cuts to IT come at a time when investment in digital business is crucial to staying competitive. Gartner said rather than not prioritising IT, business leaders are engaging in ‘cost optimisation’ efforts to enable continued investment in the new capacity.
"Typically, less than 10 per cent of organisations are in cost optimisation or cost cutting mode. However, the need to spend on digital business initiatives in a time when revenue growth does not support runaway IT budgets is forcing more organisations to optimise as a first step,” said John-David Lovelock, research VP at Gartner.
"As an example, the savings from legacy system optimisation and enhancements are being redirected to fund digital initiatives. It's about doing more with the same funds."
Lovelock said evidence of optimisation efforts was most visible in the switches in spending between assets and services.
"Most traditional IT now has a 'digital service twin' — license software has cloud software, servers have infrastructure-as-a-service and cellular voice has VoLTE. Things that once had to be purchased as an asset can now be delivered as a service." he said.
"Most digital service twin offerings change the spending pattern from a large upfront payment to a smaller reoccurring monthly amount. This means that the same level of activity has a very different annual spend."
The research shows communication services and devices will see the largest decline in investment since 2015 (-3.75 per cent and -2.0 per cent respectively). Gartner expects increased investment in software (4.2 per cent), IT services (2.1 per cent) and data centre systems (2.1 per cent).
Gartner analysts plan to discuss changes in global IT
spending from 2016-2019 in an
upcoming free-to-access webinar on April 12.
Commenting on the Gartner forecast, IBRS advisor Guy Cranswick noted that there were a number of other varying factors that may also be affecting IT expenditure, including global deflation resulting in cheaper products and services, and an already-high level of IT investment decreasing the necessity for further spending.
"ABS data on technology investment, and also analysis on productivity, indicates that IT investment is a marginal driver of productivity given the high levels of technology investment already," said Cranswick.
"Beyond 2020, it's very risky to estimate IT expenditure]. Based where interest rates are globally and demography (more boomers retiring thus affecting aggregate demand) IT remaining low might be more certain than a break-out boom."