Global IT spending to hit $4.4tn in 2022 as companies accelerate digital transformation

Inflation and higher asking prices from service providers are not expected to hinder investments in the next two years, Gartner report says

The current dearth of talent in the IT services industry is prompting companies to offer more competitive salaries, a Gartner report shows. Bloomberg

Worldwide spending on IT technologies is projected to grow 4 per cent to more than $4.4 trillion in 2022 as organisations pin their investments on long-term digital transformation, a new study from Gartner reveals.

These investments are expected to grow 5.5 per cent to more than $4.67tn in 2023 as companies shrug off inflation and higher prices from technology service providers owing to shortage of talent, the US research company said on Wednesday in its quarterly report.

The capabilities of companies in the next two years would address disruptive factors, including geopolitical situations, currency fluctuations and supply chain challenges, which are among "the many factors vying for [chief information officers'] time and attention", John-David Lovelock, research vice president at Gartner, said in the report.

"This year is proving to be one of the noisiest years on record for CIOs ... contrary to what we saw at the start of 2020, CIOs are accelerating IT investments as they recognise the importance of flexibility and agility in responding to disruption," he said.

Organisations continue to step up their digital transformation efforts in a rapidly evolving landscape where more users are relying on digital platforms.

The digital transformation market is expected to reach $1.25tn by 2026 from $521.5 billion in 2021, according to Markets and Markets.

Investment in direct digital transformation projects is projected to grow at a compounded annual rate of 16.5 per cent from 2022 to 2024, up from the 15.4 per cent growth rate from 2019 to 2024, according to the International Data Corporation.

Gartner's report showed that spending on software will grow most, projected to increase almost 10 per cent to about $675bn in 2022 and 11.8 per cent to $754.8bn in 2023.

Communications services – the transfer of digital data – will top the investment charts at $1.45tn this year and $1.46tn in 2023, albeit at the slowest growth of 0.3 per cent and 2 per cent, respectively.

The IT services category is the only other vertical to have a projected trillion-dollar spend, growing 6.8 per cent to $1.27tn in 2022 and 8.5 per cent to $1.37tn in 2023, Gartner said.

Inflation and an increase in fees of IT service providers – because of the competitive salaries they offering their employees owing to talent shortage – are not expected to hinder these investments.

The purchasing and investing preferences of companies will be primarily focused on areas such as analytics, cloud computing, customer experiences and security, the report said.

CIOs play a key role in differentiating and growing their business, and they need to work closely with senior management to develop digital-enabled solutions that generate revenue or improve profit margins, Gartner said.

This year is proving to be one of the noisiest years on record for CIOs ... at this point, only the most fragile companies will be forced to pivot to a cost-cutting approach in 2022 and beyond

John-David Lovelock,
distinguished research vice president at Gartner

Failure to do so would result in companies lagging behind both in terms digital development and the value they offer to customers, it said.

“CIOs who keep their eye focused on key market signals, such as the shift from analog to digital business and buying IT to building it, as well as negotiate with their vendor partners to assume ongoing risks, will fare better in the long term," Mr Lovelock said.

"At this point, only the most fragile companies will be forced to pivot to a cost-cutting approach in 2022 and beyond.”

Technology service providers, on the other hand, should not be "blindsided" by threats of shrinking markets, commoditisation and disruptive competition, and a broader and long-term perspective is needed for them to discover markets and opportunities to grow, Gartner said in a separate report.