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NZ tech spending to reach $13.9 billion in 2020 - Gartner

NZ tech spending to reach $13.9 billion in 2020 - Gartner

Gartner says complex geopolitical environment and cloud adoption are impacting ICT investment decisions.

Credit: 119862941 Dreamstime

A core challenge facing the industry is how organisations can operate as both a traditional company and a technology company at the same time

John-David Lovelock, Gartner

Gartner says worldwide IT spending is projected to total US$3.7 trillion in 2019, an increase of 0.4 per cent.

While the analyst firm says this is the lowest forecast growth in 2019, so far, it expects global IT spending to rebound in 2020.

Gartner is forecasting growth of 3.7 per cent next year, mainly due to enterprise software spending.

In New Zealand, Gartner reports spending on technology products and services is forecast to reach NZ$13.4 billion this year, up 2.3 per cent from 2018.

In 2020, local ICT spending is forecast to reach NZ$13.9 billion, a growth of 3.6 per cent.

Higher growth rates are forecast for Australia. 

Gartner says spending on technology products and services in Australia is forecast to total A$93.7 billion this year, up 3 per cent from 2018. It is expected to grow  4.6 per cent to reach almost A$98 billion in 2020.

“The slowdown in IT spending in 2019 is not expected to stretch as far into 2020 despite concerns over a recession and companies cutting back on discretionary IT spending,” observes John-David Lovelock, research vice president at Gartner.  

Lovelock says the current complex geopolitical environment has pushed regulatory compliance to the top of organisations’ priority list.

Gartner notes how overall spending on security increased 10.5 per cent in 2019, with cloud security projected to grow 41.2 per cent over the next five years. 

The device market will see the sharpest spending decline among all segments

“This is not just about keeping the ‘bad guys’ out,” says Lovelock. “It is also about the expanding need to be compliant with tariffs and trade policy, intellectual property rights, and even with the multiple and sometimes overlapping privacy laws.”

Despite the ongoing tariff war, US IT spending is forecast to grow 3.5 per cent in 2019, but IT spending in China is expected to grow only 0.1 per cent. 

“Tariffs do not have a direct effect on IT spending, yet,” says Lovelock. 

“Should tariffs extend to devices like PCs and mobile phones, we will likely see manufacturers switch supply routes to minimise costs and have their technology made outside of China.”

The device market will see the sharpest spending decline among all segments in 2019, down 5.3 per cent from $713 billion in 2018.

However, the market is expected to see modest growth of 1.2 per cent in 2020, says Gartner.

Credit: Gartner

“Similar to how consumers have reached a threshold for upgrading to new technology and applications, technology general managers and product managers should invest only in the next generation of products that will push them closer to becoming a true technology company,” says Lovelock.

IT spending growth is being driven by the rest of the world catching up on cloud spending. The US is leading cloud adoption and accounts for over half of global spending on cloud. In some cases, countries that Gartner tracks lag one to seven years in cloud adoption rates. 

IT spending growth is being driven by the rest of the world catching up on cloud spending

“For perspective, the country directly behind the US on cloud spending is the United Kingdom, which only spends 8 per cent on public cloud services. An interesting outlier is China, which has the highest growth of cloud spending out of all countries. While China is closing the spending gap, it still will not reach US levels by 2023,” says  Lovelock.

Gartner predicts that organisations with a high percentage of IT spending dedicated to the cloud will become the recognised digital leaders in the future. 

“Most companies are caught trying to either cut costs or invest for growth, but the top-performing enterprises are doing both. A core challenge facing the industry is how organisations can operate as both a traditional company and a technology company at the same time,” says  Lovelock. “These ‘and’ dilemmas will drive future IT spending trends.”

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Tags CloudprivacycomplianceGartnerICT spendingenterprise software solutionstariffsceo and cioCIOS and the boardJohn-David Lovelockleadershipbudgettingcybersecuritygeopoliticstrade war

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