Generative AI not yet significantly impacting IT spending levels

According to Gartner worldwide IT spending will grow 4.3% this year – but despite all the noise around generative AI, it is not moving the dial much at the moment.

The 4.3% jump amounts to a projected $4.7 trillion in worldwide IT spending in 2023, driven in no small part by a 14.5% jump in software spending – according to figures from Gartner.

However while it seems every other news story in tech at the moment in some way shape or form mentions the impact of generative AI on the workplace and society, Gartner doesn’t think the sector is yet making a big disruption when it comes to IT spending, and that in the future it will primarily be incorporated into existing areas.

“Generative AI’s best channel to market is through the software, hardware and services that organisations are already using,” said John-David Lovelock, Distinguished VP Analyst at Gartner.

“Every year, new features are added to tech products and services as add-ons or upgrades. Most businesses will incorporate generative AI in a slow and controlled manner through upgrades to tools that are already built into IT budgets. When it comes to AI this year, organisations can thrive without having AI in production but they cannot be without a story and a strategy.”

The bump in the software segment is partly down to organisations looking to reallocate spending to core applications and platforms that support efficiency gains, such as enterprise resource planning (ERP) and customer relationship management (CRM) applications, we’re told.

This is because as CIOs ‘continue to lose the competition for IT talent’, they are buying tech that enables automation and efficiency to achieve growth with less human employees.

Spending on devices meanwhile is forecasted to decline 8.6% in 2023 due to the impact of inflation on consumer purchasing.

“The devices segment is experiencing one of its worst growth years on record,” added Lovelock. “Even as inflation eases slightly in some regions, macroeconomic factors are still negatively impacting discretionary spending and lengthening device refresh cycles. Devices spending is not expected to recover to 2021 levels until at least 2026.”

The key takeaway seems to be that rather than creating a whole new segment which bean counters in IT departments and elsewhere need to reallocate funds to in order stay up to date with the latest tools, generative AI will be incorporated into areas they are already have on the books.

The other interesting thing to note is that while there is often talk of automation or AI swooping in and dissolving people’s jobs, the point made in the Gartner report seems to be that spend in these areas is a response to filling gaps where they don’t have or can’t get the human talent in place.

Get the latest news straight to your inbox. Register for the Telecoms.com newsletter here.