Another week brings another clear sign that CIOs are making deep budget cuts in response to the COVID-19 pandemic. In a new report, research firm Gartner says it thinks global tech spending will drop 8% in 2020 based on what it is hearing from tech suppliers and other sources. It’s forecasting that $3.46 trillion will be spent on IT products and services this year by businesses and consumers, down from $3.76 trillion in 2019.
Gartner’s estimate is the latest in a series of predictions by research firms that have become more and more pessimistic as the crisis has deepened. Last month, Enterprise Technology Research (ETR), which regularly polls IT leaders about their spending intentions, came up with a forecast suggesting a drop of around 5% in global spend for 2020. In the latter part of March, the feedback ETR had been getting from executives suggested spending would be flat year-on-year.
While some companies are cutting big IT projects altogether, others are ploughing ahead but delaying some elements of their plans to save money. During an earnings call in April, Hershey CEO Michele Buck revealed the confectionery giant has paused parts of a new enterprise resource planning (ERP) system. It plans to advance with finance and data workstreams but will delay supply chain and order-to-cash ones—moves that will push out full implementation of the ERP system by a year or so. On the same call, Hershey’s CFO said the company’s capital spending would be between $400 million and $450 million in 2020 versus an estimate of $500 million it had released in January.
John-David Lovelock, Gartner’s chief forecaster, cites other examples of delays, such as health care systems pushing out projects to create digital health records by six months or more. The research firm, which isn’t betting on a rapid V-shaped economic recovery, reckons IT spending in some of the worst-hit sectors such as airlines and hotels could take more than three years to rebound to 2019 levels.
Although Gartner expects all of the major categories of IT investment to drop sharply this year, as the table above from its report shows, spending in some sub-categories could still soar as companies accelerate digital transformation strategies. Cloud computing is a good example: Gartner expects money spent on public cloud services to rise by 19%. “Companies have to be more digital than they had planned to be,” says Lovelock.
Software that automates processes is also likely to benefit as executives push hard for greater efficiencies. A survey of 867 finance chiefs across 24 countries and territories conducted in early May by consulting firm PwC found that almost half of the CFOs expected to increase automation of operations. That should mean more business for UiPath, Automation Anywhere, and other providers of robotic process automation software. COVID-19 is clearly very bad for business but it could give a big boost to bots.