- Global spending on IT will balloon to $4.7 trillion by the end of the year, according to Gartner’s analysis of second quarter sales data from over a thousand vendors. Enterprise tech investments are currently on track to increase 4.3% year over year, nearly doubling 2022’s growth rate, the Wednesday report said.
- Despite the rapid proliferation of generative AI tools, the technology is not yet significantly impacting enterprise spending, according to Gartner. The analyst firm believes the new tools will be incorporated through existing spending, the report said.
- “Generative AI’s best channel to market is through the software, hardware and services that organizations are already using,” said John-David Lovelock, distinguished VP analyst at Gartner. “Most enterprises will incorporate generative AI in a slow and controlled manner through upgrades to tools that are already built into IT budgets.”
IT spending forecasts have fluctuated this year. The analyst firm dialed back its tech spending forecast at the start of the year, projecting a growth rate of just 2.4% in January, but boosted it to 5.5% in April, based on undiminished enterprise appetite for digital transformation during the first quarter.
Enterprise tech investments are outpacing annualized inflation, which hit a two-year low of 3% in June, according to Consumer Price Index data.
Despite a modest uptick in tech worker unemployment rate last month, CIOs remain caught between unwavering enterprise demand for business transformation and a dearth of available talent.
“As CIOs continue to lose the competition for IT talent, they are shifting spending to technologies that enable automation and efficiency to drive growth at scale with fewer employees,” the report said.
Organizations have prioritized optimization, according to Lovelock.
“Digital business transformations are beginning to morph,” said Lovelock. “IT projects are shifting from a focus on external-facing deliverables such as revenue and customer experience, to more inward facing efforts focused on optimization.”
The trend is reflected in where spending growth is highest.
Gartner expects software, the fastest-growing segment, to achieve a double-digit growth rate of 14% on the year, as organizations reallocate spending to squeezing more value out of ERP and CRM applications, as well as other core platforms that deliver efficiency gains.
The market for devices and data center systems, in contrast, will contract by 9% and 2% respectively, the report said.
While AI has yet to take over large portions of IT spending, CIOs should be weighing their options, making plans and articulating their vision for the new technology.
“When it comes to AI this year, organizations can thrive without having AI in production, but they cannot be without a story and a strategy,” Lovelock said.