The coronavirus pandemic will have a lasting effect on the IT industry, with worldwide IT spending expected to decline 2.7% this year, instead of the previous January forecast of 5.1% growth, according to the International Data Corporation (IDC).
The IDC forecast dropped to 4.3% in February, and then hit -2.7% for March as COVID-19 infections became widespread and the World Health Organization declared it a global pandemic.
“Overall IT spending will decline in 2020, despite increased demand and usage for some technologies and services by individual companies and consumers,” said Stephen Minton, program vice president in IDC’s Customer Insights & Analysis group, in a press release. “Businesses in sectors of the economy that are hardest hit during the first half of the year will react by delaying some purchases and projects, and the lack of visibility related to medical factors will ensure that many organizations take an extremely cautious approach when it comes to budget contingency planning in the near term.”
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The biggest spending declines are expected to be seen in PCs, tablets, mobile phones and peripherals. Overall device spending will decline by 8.8%. There was already an expected decline in the PC market due to a strong Windows-refresh cycle in 2019.
The smartphone market was expected to show growth this year due to 5G upgrades. However, with supply chain disruptions, it will be difficult for manufacturers to make product available and consumer demand will be lower. For instance, Apple is considering delaying the launch of its 5G iPhone by months, according to a report by the Nikkei Asian Review. It was originally slated for a September 2020 release.
There’s also an expected decline in server/storage and network hardware, despite demand for cloud services. This is because enterprise customers will be delaying purchases during the initial response phase to the pandemic crisis. Total infrastructure spending, including cloud, will increase by 5.3%, but enterprise spending on Infrastructure-as-a-Service (IaaS) will comprise all of this growth. Overall server/storage hardware spending will be down by 3.3%, and enterprise network equipment spending will decline by 1.7% in 2020.
“Hardware spending in general is always identified for rapid spending cuts during any economic crisis, as a means for enterprises to quickly protect short-term profitability,” Minton said in the release. “In previous economic crashes, IT hardware has tended to overshoot the economic cycle on both the downside and in the recovery phase. That’s because underlying demand drivers don’t change overnight, but the timing of purchases is shifted and delayed, and this can now be done even more quickly than in the past. What’s different now is that cloud is a bigger factor than it was in any previous global recession, and this should mean that overall spending is less volatile than in the last two major IT spending downturns.”