Dive Brief:
- Gartner forecasts an 8% increase in IT spending this year, with massive cloud data center investments helping to drive global tech spend to nearly $5.1 trillion. The analyst firm expects annual spending on technology to surpass $8 trillion by the end of the decade, according to a Wednesday report.
- Generative AI enthusiasm triggered “gold rush level spending” on semiconductors and servers for IT service providers, Gartner VP and Distinguished Analyst John-David Lovelock said in the report. AI-optimized hardware will likely account for 60% of hyperscaler server spending this year, the report said.
- “The first people to make money in a gold rush are the ones supplying the infrastructure,” Lovelock told CIO Dive. “So the first people doing the spending right now are the ones getting the infrastructure ready.”
Dive Insight:
Generative AI unleashed a torrent of infrastructure spending in the last several months, prompting Gartner to add roughly $63 billion to its January 2024 IT spending forecast.
The downstream effects of AI adoption are starting to show up in enterprise PC procurements, as well as in the IT services sector and software, Lovelock said. The technology has even elevated email and authoring, an often overlooked but large category of enterprise spend.
“Everybody in the world is putting a wrapper around email and authoring and there are vendors charging $20 or $30 per month for an AI tool that writes a better email or creates a better slideshow,” said Lovelock. “We’re adding $6 billion a year in email and authoring,” he added.
Spending on IT services, Gartner’s second fastest growing category behind software, will surpass $1.5 trillion in 2024, a nearly 10% year-over-year increase, according to the report.
As enterprises fall behind IT services firms in the battle to attract tech talent, outsourcing has become a bigger business. Lovelock characterized the shift as an inflection point, with enterprises spending more on consulting than internal staff for the first time.
The IT services category is on pace to grow into the largest segment of IT spend, overshadowing communications services, which saw a year-over-year bump of 4.3%.
Gartner rarely sees significant growth in communications services, Lovelock said, attributing this year’s bump to “price increases the mobile services companies have been putting in place for the last two years.”
Communications services may be the only major category largely unaffected by generative AI, although it is becoming difficult to separate AI from cloud and SaaS spend as the technology becomes embedded in existing services and platforms.
“Generative AI has blown the lid off of how much you can buy … and it’s impossible to say how much is being spent on the technology,” Lovelock said. “If you’re spending a million a month on Salesforce and you’re using their AI product, it’s going to be difficult to say how much of that million you’re spending on AI.”
