Global IT spending to hit $5.1tn in 2024 with generative AI's impact to be felt in 2025

Executives say today’s AI projects will be central to developing a strategy before generative AI becomes part of their IT budgets in 2025

Enterprises are expected to continue investing in AI and automation to increase operational efficiency and bridge IT talent gaps, Gartner said. Bloomberg
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Global spending for information technology is projected to hit about $5.1 trillion in 2024, but the impact of generative artificial intelligence will not be felt until 2025, a new report has found.

The total would be an 8 per cent increase from 2023, with generative AI to account for “very little IT spending” this year and next, only becoming a considerable factor in company budgets by 2025, US research firm Gartner said.

“However, organisations are continuing to invest in AI and automation to increase operational efficiency and bridge IT talent gaps,” John-David Lovelock, a distinguished vice president analyst at Gartner, wrote in the report.

“The hype around generative AI is supporting this trend, as chief information officers recognise that today’s AI projects will be instrumental in developing an AI strategy and story before generative AI becomes part of their IT budgets starting in 2025.”

Gartner's latest report ties in with its recent study that generative AI is overhyped, positioning it at the peak of “inflated expectations” for emerging technology in 2023, close behind AI-augmented software engineering and cloud technology.

Generative AI was brought into the limelight with the emergence of ChatGPT, the conversational platform from Microsoft-backed Open AI that triggered a race between technology companies and personalities.

The technology is expected to deliver “transformational benefits” within two to five years before plateauing, a state in which little or no progress is being made after a period of development, it had said.

Gartner defines “transformational benefits” as something that “enables new ways of doing business across industries that will result in major shifts in industry dynamics”.

“While generative AI has not yet had a material impact on IT spending, investment in AI more broadly is supporting overall IT spending growth,” Gartner said in the new report.

IT spending growth in 2024 will be led by software, which is projected to rise nearly 14 per cent to more than $1 trillion, it said.

The IT services category is also expected to post double-digit growth of 10.4 per cent, and would lead in terms of value with nearly $1.55 trillion.

These two segments will be largely driven by the cloud, as global spending on public cloud services is projected to surge 20.4 per cent in 2024 on the back of a combination of cloud seller price increases and increased use, the study showed.

Data centre systems, devices and communications services are to post growth of 9.5 per cent, 4.8 per cent and 3.3 per cent, respectively, with the value of the last category seen close to $1.5 trillion, Gartner said.

Software is also being boosted by cybersecurity spending, as AI has “created a new security scare for organisations”, Mr Lovelock said.

In a separate study, Gartner said that about 80 per cent of chief information officers plan to increase spending on cyber and information security in 2024, the top technology category for increased investment.

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“Gartner is projecting double-digit growth across all segments of enterprise security spending for 2024,” he said.

A portion of IT spending this year is also being delayed to 2024 as chief information officers are experiencing “change fatigue”, which Gartner defines as a “hesitation to invest in new projects and initiatives”. This trend is expected to continue into 2025, it said.

The delay is being caused by “a new wave of pragmatism, capital restrictions or margin concerns”, Mr Lovelock said.

“Organisations are shifting the emphasis of IT projects towards cost control, efficiencies and automation, while curtailing IT initiatives that will take longer to deliver returns.”

Updated: October 21, 2023, 1:50 PM