UPDATED 20:15 EST / MAY 04 2020

INFRA

IDC now predicts IT spending will decline 5.1% in 2020

The COVID-19 pandemic is forcing enterprises to cut back on their technology spending, according to the latest forecast from International Data Corp.

The research firm today updated its worldwide information technology spending forecast, now projecting that spending will decline by 5.1% in 2020. Still, it said, IT infrastructure spending will grow by about 4% this year, to $237 billion, driven by a rising demand for cloud services.

IDC had originally forecast IT spending to grow by about 5% this year. It revised that prediction in March when the coronavirus outbreak began spreading from China to other parts of the world, forecasting growth of just 1% in 2020.

In today’s update, IDC said enterprises are planning to maintain spending on cloud deployments as a way of controlling costs and deferring capital spending on upgrades to existing on-premises data centers and applications.

But that means enterprises will have less money to spend on other new toys, with devices and hardware likely to suffer the most.

“Overall spending on devices including PCs and phones will be down significantly this year and is the main drag on total IT spending with the economic fallout likely to disrupt upgrade cycles for smartphones, which were expected to be boosted by the launch of premium 5G devices,” the analyst firm said. “The PC market was already expected to decline this year after a commercial refresh cycle in 2019, leaving discretionary upgrades to new notebooks and tablets extremely vulnerable to any period of economic decline.”

IDC added that it expects spending on software to fall by 1.9% and IT services to decline by 2.6%. That will mostly be the result of delays in large projects that have been put on the back burner because of COVID-19, IDC said. However, some IT services relating to the management, support and operations of critical assets will stay flat, as will spending on digital transformation projects.

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“Inevitably a major economic recession, in Q2 especially, will translate into some big short-term reductions in IT spending by those companies and industries that are directly impacted,” said Stephen Minton, program vice president in IDC’s Customer Insights and Analysis group. “Some firms will cut capital spending and others will either delay new projects or seek to cut costs in other ways. But there are also signs that some parts of the IT market may be more resilient to this economic crash in relative terms than previous recessions with technology now more integral to business operations and continuity than at any time in history.”

IDC’s forecast tallies with findings from another research firm, Enterprise Technology Research, which also projects spending on information technology infrastructure to decline by 5% this year.

Wikibon analyst Dave Vellante provides more commentary on ETR’s analysis in this clip:

Photo: ananitit/Pixabay

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