Recession rumours, Brexit, trade wars and tariffs… it’s a heady cocktail of headwinds for the economy. It would be safe to assume that the information technology (IT) sector would be the first to be hit.
Research and advisory firm, Gartner’s latest IT spending report cuts world IT spending to $3.74 trillion, a growth of 0.6 percent from 2018. This is a marginal cut from the $3.79 trillion projected in April 2019, which was a growth of 1.1 percent from 2018.
“Despite uncertainty fueled by recession rumours, Brexit, trade wars and tariffs, we expect IT spending to remain flat in 2019,” explains John-David Lovelock, research vice president at Gartner.
“While there is great variation in growth rates at the country level, virtually all countries tracked by Gartner will see growth in 2019. Despite the ongoing tariff war, North America IT spending is forecast to grow 3.7 percent in 2019 and IT spending in China is expected to grow 2.8 percent,” he added
Impact On Indian IT: Devil Is In The Details
Spending on devices has been hit the most, with a projected decline of 4.3 percent, followed by data centres with an expected decline of 3.5 percent. So clients are spending lesser on data centres and devices but increasing spending on IT services and enterprise services.
For the year, IT services spending is projected to increase by 3.8 percent. This is higher than the projected increase of 3.7 percent that Gartner indicated last quarter. Spending on enterprise software is expected to increase by 9 percent.
Indian IT services companies get the bulk of IT services spending so 2019 is actually looking positive for Indian IT despite macro-economic concerns. Indian IT companies have also been gradually increasing market share in the enterprise software segment, and with spending projected to increase the most there, it is a sign of things to come.
Gartner believes that as cloud becomes increasingly mainstream over the next few years, it will influence ever-greater portions of enterprise IT decisions, in particular, system infrastructure.
Prior to 2018, more of the cloud opportunity had been in application software and business process outsourcing. Over this forecast period, it will expand to cover additional application software segments, including office suites, content services and collaboration services. “Spending in old technology segments, like data center, will only continue to be dropped,” says Lovelock.
But Should Indian IT Prepare For A downturn?
While Gartner does not believe a recession is around the corner, the fact is that the client’s decision making may be impacted and delayed in anticipation of a downturn.“Although an economic downturn is not the likely scenario for either 2019 or 2020, the risk is currently high enough to warrant preparation and planning. Technology general managers and product managers should plan out product mix and operational models that will optimally position product portfolios in a downturn should one occur,” explains Lovelock.