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Silver lining predicted for coronavirus-impacted global IT spending

Silver lining predicted for coronavirus-impacted global IT spending

2020’s decline is forecast to return to pre-coronavirus levels in a year’s time

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Worldwide IT spending during 2020 is expected to be worse than previously anticipated due to the coronavirus pandemic, with forecasts it will see an estimated decline of 5.1 per cent year-on-year, but there’s potential for a complete reversal in 2021.

This is according to IDC’s April iteration of its Worldwide Black Book Live Edition which, back in January 2020, predicted year-on-year growth of over 5.2 per cent.

ICT spending, which brings telecommunication and business services into the equation, is expected to see a decline of 3.4 per cent year-on-year, to just over US$4 trillion, while telecom spending is forecast to drop by only 0.8 per cent year-on-year and was labelled as “relatively stable” by IDC as 5G rollouts occur and the need for broadband services continue.

By 2021 however, these markets are expected to head back into growth and mostly return to pre-coronavirus figures – IT spending is anticipated to reach 5 per cent year-on-year, ICT spending is forecast to reach 3.1 per cent year-on-year and telecom spending is expected to reach 0.7 per cent year-on-year. 

Comparing this forecast to the growth seen in 2019, IT spending will be equal to how it was two years before, ICT spending will be 0.4 per cent lower and telecom spending will be 0.2 per cent higher.

Within IT spending, IT infrastructure spending is expected to still see growth with a rise of 3.8 per cent year-on-year to US$237 billion, due to spending by service providers and continuing demand for cloud services.

Stephen Minton, program vice president for IDC’s Customer Insights & Analysis group, said these declines will come about due to an inevitable major economic recession, particularly in Q2.

"Some firms will cut capital spending and others will either delay new projects or seek to cut costs in other ways,” Minton said. “But there are also signs that some parts of the IT market may be more resilient to this economic crash in relative terms than previous recessions with technology now more integral to business operations and continuity than at any time in history."

The only market segment expected to see growth at this point is the infrastructure market, with most of it being in the cloud, Minton said.

“The amount of data that companies must store and manage is not going anywhere. Increasingly, even more of that data will be stored, managed, and increasingly also analysed in the cloud," he said.

Device spending will take a significant hit, declining 12.4 per cent year-on-year, with IDC analysis claiming the economic fallout of the pandemic is likely to disrupt upgrade cycles that were previously anticipating the launch of premium 5G devices. The PC market, meanwhile, was always expected to see a decline and reached the peak of its upgrade cycle in 2019

The decline in software spending, at 1.9 per cent year-on-year, and IT services spending, at 2.6 per cent year-on-year, were both associated with project delays. However, IT services spending is expected to be somewhat protected as there is still a need for need of management, support and operations.

"IT spending is very uneven right now with businesses dealing with the type of crisis that was not envisaged in many contingency plans," said Minton.

"When all is said and done, we expect to find that early adopters of cloud and other digital technologies were best positioned to ride out this kind of storm with the least amount of disruption from an operational perspective, even if the direct impact on revenue is still more affected by external factors that no CEO or CIO saw coming."

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