When asked about economic forecasting, the economist Ezra Solomon famously declared: “The only function of economic forecasting is to make astrology look respectable.”
With that quote in mind, I embarked on writing a post forecasting that IT spending will accelerate in 2024. I’ll leave the granular predictions and forecasts to others but will provide a brief overview on how IT spending is projected to finish in 2023 and, as noted, a forecast for 2024.
This post really isn’t about the forecast for IT spending, however. Rather, it’s about why IT spending will accelerate in 2024 and beyond and just what this means for business technology decision-makers. Let’s start with some background details:
The global IT market encompasses a broad range of segments:
- Cloud computing services
- Software: Enterprise software (e.g., ERP, CRM), personal software, operating systems, and more
- Hardware: Personal computers, servers, storage, and more
- Services: IT consulting, system integration, and more
- Telecommunications: Service providers, equipment manufacturers, and more
IT spending is forecast to grow a robust 5.5% in 2023, according to Gartner. This strong growth rate has surprised some who predicted that IT spending growth would slow in 2023.
What’s even more eye-popping is that IT spending is forecast to accelerate to 9% growth in 2024, based on a consensus of forecasts, while the 2024 revenue forecast for the Global IT market is $5.1 trillion.
IT’s Essential Role in Every Business, Industry
Let’s face it, unless you’re an economist the concept of a multi-trillion dollar market is difficult to wrap your head around. The IT market is one of the largest markets globally, but it is not the largest market in the world…even if it feels like it should be, given the pervasiveness of technology in nearly all aspects of modern life.
In an era where every company is becoming a technology company, IT has become like energy or finance. Technology is now an essential tool in every industry and every company. Increasingly, the difference between the leading and trailing companies in every industry is that the leaders know how to harness the power of technology. To ensure I don’t veer into astrology, I won’t make any bold predictions about business technology spending in 2024 beyond the consensus of 9% growth. I will go on record as saying though, it won’t surprise me if IT spending in 2024 surpasses that forecasted 9% rate.
Business Growth Drivers
The key for technology buyers today is understanding the “why” behind the growth in IT spending and “how” they can best prepare themselves and their companies to keep pace and remain competitive in a digital-first world. With this in mind, here are 10 key growth drivers behind these spending increases:
- Digital Transformation: Every industry and every business is undergoing some form of digital transformation. In order to stay competitive, companies need to continually reevaluate their investments in new technologies, systems, and platforms.
- Cybersecurity Threats: The frequency and sophistication of cyber-attacks are on the rise. Businesses are allocating more resources to strengthen their security infrastructure, hire skilled professionals, and ensure compliance with evolving regulations.
- Cloud Computing: The migration to cloud platforms has led to increased spending. While cloud can lead to cost savings over time, the initial move and setup often require substantial investments.
- Big Data and Analytics: Companies are leveraging big data to gain insights, optimize processes, and provide better customer experiences. This requires sophisticated tools, storage solutions, and expertise.
- Emerging Technologies: The rise of AI, machine learning, Internet of Things (IoT), and augmented/virtual reality necessitates increased budget allocations to research, development, and deployment.
- Business Continuity: The COVID-19 pandemic highlighted the importance of remote work capabilities and robust IT infrastructure. As a result, businesses are investing more to ensure continuity in the future.
- Regulatory Compliance: With the introduction of regulations like GDPR and CCPA, companies must invest in IT platforms and applications to ensure compliance and avoid potential fines.
- Software Development: Software really is eating the world. The demand for custom software, mobile apps, and integrations has surged, leading to higher development costs.
- Infrastructure Upgrades: Aging IT infrastructure can be a liability. Regular investments are needed to replace or upgrade hardware, software, and networks.
- User Experience and Customer Expectations: As consumers become accustomed to faster, more intuitive digital experiences, companies must invest in tech to meet customer demands for better user experiences.
Technologies Leading the Way
Here are six technology areas that I expect to fuel IT spending growth in 2024 and beyond:
- As-a-Service Models: Companies will continue to opt for “as-a-service” models, such as Software-as-a-Service (SaaS) or Infrastructure-as-a-Service (IaaS), to spread out costs over time rather than making substantial upfront investments.
- Automation: Automation technologies can lead to remarkable gains in efficiency and productivity. The introduction of Generative AI in a wide range of SaaS products and services will accelerate spending on automation technologies.
- Edge Computing: While Generative AI garners most of the headlines, as IoT and real-time data processing become more prevalent, there’ll be a shift towards edge computing, requiring new investments.
- Quantum Computing: 2024 might be a bit early for this one but, as quantum computing becomes more accessible, businesses may begin allocating portions of their IT budgets to explore its potential.
- Sustainability: ESG initiatives will continue to be a priority. Companies will invest in eco-friendly hardware, data centers, and practices.
- Decentralized Technologies: With the growth of blockchain and decentralized platforms, businesses might increase spending to integrate or leverage these technologies.
I look forward to hearing about your technology plans for 2024. Drop me a note at email@example.com and let me know where you see IT spending going and what new technologies you’ll be investing in.