Predictions for IT development after COVID-19

Gartner and IDC predict that global IT spending will fall sharply this year, but the cloud services sector is an exception as companies accelerate their transformation strategies.

With workplaces closed around the world, PCs, smartphones and cloud applications have become more important for people to collaborate, but the economic impact of the COVID-19 pandemic will reduce IT spending on these technologies this year.

In the wake of the outbreak, Gartner and IDC revised their forecasts for 2020, predicting a bleak outlook for the year.

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According to IDC, global enterprise IT spending (including telecommunications and business services) grew 5.0% year-over-year in 2019, and in January 2020 it forecast year-over-year growth of 5.1%. Four months later, IDC now expects overall IT spending to fall 5.1% in 2020.

Gartner is more pessimistic, predicting that global IT spending will fall 8% this year, while it previously expected global IT spending to grow 1% in 2019.

These figures mask huge differences between industries.

Spending on devices such as mobile phones and PCs will see the biggest swings, with IDC predicting a 12.4% drop in 2020, compared to a 0.9% increase last year. Gartner predicts an even bigger drop of 15.5%, but despite Gartner's forecast, 2019 device spending of $698 billion was already down 2.2% from the previous year.

Enterprise software vendors (which grew 10% in 2019, according to IDC, and 8.8%, according to Gartner) face a tough 2020, with IDC predicting a 1.9% drop in sales this year and Gartner predicting a 6.9% drop.

Both analyst firms believe that the telecommunications industry will be the least affected, as increased demand for services such as home broadband will offset the reduction in the number of people going to work. IDC expects telecom spending to fall from a 0.5% increase last year to a 0.8% drop this year. According to Gartner, spending on communications services fell 1.6% last year and will fall further by 4.5% this year.

The bright future of cloud computing

The outlook for infrastructure sales, however, is less clear. IDC sees that segment as the only bright spot, predicting sales will grow 3.8% in 2020, down from 8.8% last year. Gartner, however, sees spending on data center systems falling sharply this year, by 9.7%, after a modest 0.7% increase in 2019. The difference may be due in part to definition: IDC defines the infrastructure category as including servers, storage and networking hardware, as well as infrastructure as a service. Gartner, on the other hand, spreads sales of public cloud services (sales of which are expected to grow 19% this year) across multiple categories.

Both companies believe that the cloud computing sector will grow, predicting that enterprises will further adopt cloud services to offset the reduction in capital expenditures. IDC believes that infrastructure hardware will also continue to grow, as the company expects service providers to increase their own spending to build out physical infrastructure to meet demand.

Cloud-based calling, messaging, and conferencing will see huge growth in 2020, with Gartner predicting sales for these two businesses will increase by 8.9% and 24.3%, respectively.

Transforming IT's top priority

For IT organizations facing budget cuts, Gartner recommends minimizing investments and prioritizing operational activities that keep the business running, at least for the rest of the year. Although some long-term cloud business transformation projects may be put on hold, Gartner believes that over the next two years, enterprises will move aggressively toward cloud computing, with cloud computing spending in 2022 reaching the levels that analysts had previously expected in 2023 or 2024.

Businesses won’t be able to “re-energize” quickly, especially in heavy industry, air transport or entertainment. Gartner said business recovery will require a new mindset in IT departments and that it could take three years for spending in these industries to return to 2019 levels.

IDC expects that enterprises will continue to invest in existing cloud deployments and see accelerating cloud computing projects as a way to control other costs. However, delaying other large projects will save fees on external service providers and consulting firms, as well as save on deferred licensing and infrastructure costs.

Forrester analysts also recommend moving to the cloud overall or using subscription-based services to make it easier to balance expenses with revenue and cut spending on PC replacements, save on upgrades from Windows 7 to Windows 10 and reduce the number of computers needed for new employees or employees working from home.