After seeing a 5.6 percent growth in IT services spending in the last year, Gartner forecasted that the spending on IT services will grow a more modest 4.7 and 4.8 percent in 2019 and 2020, respectively.

Gartner’s forecast predicts that IT services spending will exceed $1 trillion for the first time in 2019. However, data center systems coupled with disruptive economic events, such as the departure of Great Britain from the European Union (EU), will act as a drag on IT services spending. After growing 11.3 percent in 2018 — thanks to the rise of cloud computing — Gartner forecasts that spending on data center systems will only grow 4.2 percent in 2019, followed by for the first time in recent memory a 3.9 percent decline in 2020. 

In contrast, after growing 9.3 percent in 2018, spending on enterprise software is forecasted to grow 8.5 percent in 2018 and 8.2 percent in 2020. Overall, Gartner says global spending across all IT categories grew 3.9 percent in 2018, reaching a value of $3.65 trillion. Spending on IT overall is forecasted to grow 3.2 percent in 2019 and another 2.8 percent in 2020.

What this means for the industry

While the financial growth for any single IT services provider could come in below or above the Gartner forecast, it’s clear that Gartner is expecting a pullback on the rate at which IT spending grew in middle of the decade. As the decade comes to an end, it would appear the long-expected decline in data center system spending will finally arrive.

For IT services providers that generate a substantial amount of revenue from hardware sales and related services, there’s still plenty of time to make any required adjustments to their overall business strategy. After 2020, spending on hardware in the data center is only expected to decline at an even more accelerated rate. That doesn’t mean spending on on-premises IT will disappear entirely. Billions of dollars will still be spent on hardware that will be deployed in local data center. However, hardware sales and services competition across the sector will undoubtedly by fierce, making it a lot more challenging to continue providing these offerings profitably. 

At the same time, the rise of cloud computing services is apparently making it simpler for organizations to consume enterprise software. With annual enterprise software growth rates in excess of 8 percent through 2020, demand for services expertise in deploying and managing software should increase. Much of that spending will be driven by various digital business transformation projects. It’s worth noting that such projects are not so much events, as they are extended journeys that collectively will not result in a sharp uptick in IT spending in any single year. In fact, many of the emerging technologies such as blockchain databases and artificial intelligence (AI) systems are still in their infancy.

The good news is the outlook for spending on IT remains healthy. Still, IT services providers should proceed with care. Just because the global economy is booming, it doesn’t always mean that every sector within that economy is growing.

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Photo: Roman Samborskyi / Shutterstock

Mike Vizard

Posted by Mike Vizard

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications including InfoWorld, eWeek, CRN, Baseline, ComputerWorld, TMCNet, and Digital Review. He currently blogs for IT Business Edge and contributes to CIOinsight, The Channel Insider, Programmableweb and Slashdot. Mike blogs about emerging cloud technology for Smarter MSP.

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