The declines are inevitable, but not permanent.
The IT spending forecast from various leading industry research firms are being revised in light of the lengthy COVID-19 pandemic. That and expected declines in enterprise budgets will have tech vendors and partners rethinking what their businesses will look like in 2020, and perhaps beyond.
A recent IDC worldwide IT spending forecast expects a 2.7% decline in 2020. Forrester updated its forecast for U.S. tech market budgets in 2020 and shows a best-case 5% drop in 2020. And, CFOs responding to a Gartner survey are preparing for revenue declines of up to 30%.
“Most CFOs have told us they are using the most severe downside scenarios to inform their decisions right now. This is leading CFOs to consider drastic cost management actions across April and May,” said Alexander Bant, practice vice president, research, for the Gartner Financial Practice. “When CFOs were asked how these downside scenarios are impacting their ability to fund long-term growth investments, 70% of CFOs said they are now showing caution in the area.”
The Gartner survey of 145 CFOs and senior finance leaders was from April 12th.
Another Gartner survey of 317 CFOs and finance leaders, this one from March 30th, focused on cuts to selling, general and administrative budgets. Thirty-eight percent of finance executives don’t anticipate any cuts. Another 18% plan across-the-board cuts in every category of 10% or more. That includes IT budget cuts of 16%.
Gartner views across-the-board cuts as short-sighted. “For example, we see evidence that the coronavirus has prompted a permanent shift to more homeworking,” said Dennis Gannon, vice president, advisory for the Gartner Finance Practice. “This transition to large-scale remote working puts additional strain on the IT department. Therefore, forcing the IT infrastructure group to bear the same cost reductions as another functional area could expose your organization to new risks or negatively affect business continuity.”
A Forrester report, “US Tech Budget Outlooks in a COVID-19 Recession,” looks at a few scenarios for the U.S. economy in 2020. Each scenario assumes that the country is in a recession, with each scenario based on progressively worse assumptions.
The best-case scenario shows a 5% drop in U.S. tech markets in 2020. This is based on the virus’s infection and death rates peaking in Q2 2020. Markets would stabilize in 2021.
The biggest declines would be in computer and communications equipment, tech consulting and systems integration services. This is due to the expectation that firms cut back on new projects. Software, tech outsourcing and telecom services would experience smaller decreases.
Scaling up the bad news, scenario B projects a 9% fall in 2020 budges with a 5% decrease in 2021. Budgets would improve by mid-2021. In this scenario, firms would cut back on software and outsourcing spending and reduce internal IT staff.
IDC reports that worldwide IT spending went from +5.1 in January to +4.3 in February to -2.7% in March.
Expect major spending declines this year in PCs, tablets, mobile phones and peripherals. Spending on server/storage and network hardware are also expected to decline, and that’s despite strong demand for cloud services.
IT services spending will decline from +3.9% in 2019 to -2.0% in 2020. The worst of those declines is project-oriented services. Spending on managed services and support services is also expected to decline. This decline is in line with overall IT activities and hardware/software deployments.
At the same time, software will post positive growth of just under 2%, due to cloud investments along with some resilient demand for specific categories that are integral to ongoing operations.
“There will be pockets of opportunity for software and related services during the next six months, as organizations create measures focused around increased remote work and collaboration,” said Stephen Minton, program vice president in IDC’s customer insights and analysis group. “Organizations that are further along the digital transformation and cloud migration scales are likely best positioned in terms of integrating these technologies into effective and agile response plans.”
IDC forecasts total Information and communication technology (ICT) spend to decline by 1.6%, to just under $4.1 trillion. ICT growth last year was 3.5%.
Cybersecurity: What to Expect in 2021
With SolarWinds Breach, ‘The Hackers Aren’t the Problem’
In 2021, Cloud Governance Becomes Imperative as Adoption Soars
How the Pandemic Will Influence Channel Partner Businesses in 2021
Stratus Technologies Targets VARs with New Partner Program
It’s 501 Somewhere: Janet Schijns on Transformational Leadership
Help Your Customers Mitigate Malware: Viruses, Worms, and Trojans…Oh My!
Lenovo to Ship Its Thinnest ThinkPad Yet with X1 Titanium Yoga
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.