Worldwide IT spending is now expected to decline 2.7% in constant currency terms this year as COVID-19 impacts the global economy and forces many organizations around the world to respond with contingency planning and spending cuts in the short term, according to IDC. In line with previous economic recessions, IT spending on hardware, software, and IT services is likely to decline by more than real GDP overall, as commercial IT buyers and consumers implement rapid cuts to capital spending in line with declining revenues, profits, market valuations, and employee headcounts.
“Overall IT spending will decline in 2020, despite increased demand and usage for some technologies and services by individual companies and consumers,” said Stephen Minton, program vice president in IDC’s Customer Insights & Analysis group. “Businesses in sectors of the economy that are hardest hit during the first half of the year will react by delaying some purchases and projects, and the lack of visibility related to medical factors will ensure that many organizations take an extremely cautious approach when it comes to budget contingency planning in the near term.”
Spending on server/storage and network hardware will also decline overall despite strong demand for cloud services as enterprise customers delay purchases during the initial rapid response phase of the current crisis. Total infrastructure spending (including cloud) will increase by 5.3%, but all of this growth will come from enterprise spending on infrastructure as a service (IaaS) and cloud provider spending on servers. Meanwhile, overall server/storage hardware spending will be down by 3.3% and enterprise network equipment spending will decline by 1.7%.
“Hardware spending in general is always identified for rapid spending cuts during any economic crisis, as a means for enterprises to quickly protect short-term profitability,” said Minton. “In previous economic crashes, IT hardware has tended to overshoot the economic cycle on both the downside and in the recovery phase. That’s because underlying demand drivers don’t change overnight, but the timing of purchases is shifted and delayed, and this can now be done even more quickly than in the past. What’s different now is that cloud is a bigger factor than it was in any previous global recession, and this should mean that overall spending is less volatile than in the last two major IT spending downturns.”
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