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Here’s how COVID-19 will hit IT spending across market verticals

Here’s how COVID-19 will hit IT spending across market verticals

Government and critical services will do well, tourism and retail, not so much

Credit: Aleksandar Pasaric

Spending on IT is expected to decline by roughly 2.7 per cent this year due to the economic impact of the ongoing coronavirus pandemic, but some verticals are likely to be harder hit than others, according to industry analyst firm IDC.

Organisations in the transportation, consumer services and retail sectors are expected to be among the industry verticals most likely to make steep cuts to their IT spending, if IDC’s Worldwide ICT Spending Guide: Industry and Company Size report is anything to go by. 

While IDC notes that hospitality and tourism-heavy industries like transportation and consumer services are expected to be the most negatively impacted markets, with IT spending expected to decline by 5 per cent or more, these particular segments are relatively small in terms of IT spending. 

However, market segments like discrete and process manufacturing both represent large opportunities for technology providers, but both also face significant risks due to the pandemic, with spending expected to fall by more than 3 per cent this year.

The news is better for more ‘recession resistant’ segments, such as government at all levels, with state, federal and local governments forecast to increase IT spend slightly in 2020 as public services work to respond to the pandemic.

Meanwhile, IDC predicts that professional services will see the strongest growth in IT spending this year, with an expected year-over-year increase of 1.7 per cent. 

It should be noted that IDC’s research captured data from several regions, including Asia Pacific -- including Australia and New Zealand -- USA, Canada, Japan, Singapore and Western Europe, among others. 

According to IDC customer insights and analysis program vice president Jessica Goepfert, the dividing line between those verticals set to see mild spending curbs or moderate increases and those expected to see a sharp drop comes down, unsurprisingly, to the critical nature of the segment or its proximity to digital technology. 

"While industries that offer digitally-enabled or critical services offer some bright spots, those industries that rely on physical products, an in-person presence, or provide luxury services are struggling," Goepfert said.

Goepfert provides a couple of tips for providers that find themselves hit by the spending slump in the harder hit segments, suggesting a potential shift of focus as an answer to the short-term IT spending disruptions thrown up by the pandemic. 

"Once the near-term reprioritisation is underway, the next step is to understand the path to recovery,” Goepfert said. “For instance, industries which have suffered major shutdowns and layoffs will be slower to invest in technology than those that have been able to maintain somewhat normal operations. 

“In order to mitigate risk and exposure to the economic downturn, technology suppliers must reprioritise and refocus their efforts toward the more resilient segments,” she said.

Credit: IDC

While different industry segments will see different rates of IT spending fluctuation as the pandemic wears on, IDC also points out that spending habits in 2020 will also depend on the size of the organisation doing the spending, with those at the smaller end of the scale likely to reduce spending more than those at the top.

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