Spending on IT services to overtake communications services for first time

That’s a 6.8% YoY bump in IT spending Gartner is forecasting, though this is down from the previous quarter’s prediction of 8% growth.

IT services will grow to become the largest segment of IT spending for the first time during the year, enjoying an 8.7% hike on 2023 to $1.5 trillion. Gartner reckons this is largely down to companies investing in ‘organisational efficiency and optimisation projects’ – which sound exciting.  

Overtaking spend in the communications services segment was ‘inevitable’ says Gartner.

“Adoption rates among consumers for devices and communications services plateaued over a decade ago,” said John-David Lovelock, Distinguished VP Analyst at Gartner.  “Consumer spending levels are primarily driven by price changes and replacement cycles, leaving room for only incremental growths, so being surpassed by software and services was inevitable. Organisations continue to find more uses for technology – IT has moved out of the back office, through the front office and is now revenue producing, until there is a plateau for how and where technology can be used in an enterprise, there cannot be a plateau in enterprise IT spending.”

While generative AI has been the talk of the town for the last year, Gartner says it will not significantly change the growth of IT spending in the near-term.

“While GenAI will change everything, it won’t impact IT spending significantly, similar to IoT, blockchain and other big trends we have experienced,” added Lovelock. “2024 will be the year when organisations actually invest in planning for how to use GenAI, however IT spending will be driven by more traditional forces, such as profitability, labour, and dragged down by a continued wave of change fatigue.”

IT spending growth rate for 2023 was 3.3%, a 0.3% increase from 2022. While this was up of course, Gartner says it wasn’t higher because of ‘change fatigue’ among CIOs.

In fact this will actually remain a drag factor in 2024 despite the predicted 6.8% rise. ‘Change fatigue could manifest as change resistance’ recons Gartner, with CIOs hesitating to sign new contracts, commit to long-term initiatives or take on new technology partners.

Here’s a chart with the breakdown of Gartner’s number crunching.