IT spending will increase next year, but it will not reach pre-pandemic levels. The IT market declines of 2020 will take another two or three years to recoup, according to the most recent Gartner forecast.

Worldwide IT spending is forecast to hit $3.754 trillion in 2021, a 4% increase over 2020, a year in which spending is expected to reach $3.6 trillion. This is a 5.4% decline from 2019, when spending hit $3.816 trillion. The forecast was released Tuesday during the virtual Gartner IT Symposium/Xpo Americas conference, which will run through Thursday.

SEE: Gartner’s top tech predictions for 2021 (free PDF) (TechRepublic)

In 2020, each IT spending segment is expected to decline. This includes data center systems, enterprise software, devices, IT services and communication services. Devices will take the biggest hit in 2020, down 13.4%. But in 2021, enterprise software will have the strongest rebound, with 7.2% growth. Coming in second will be data center systems, with 5.2% growth. The weakest growth area will be communications services with 2.8% growth in 2021.

Image: Gartner

Cash is emperor for the enterprise

John-David Lovelock, distinguished research vice president at Gartner, said in a press release, “The spending slowdown that took place from roughly April through August of this year, coupled with cloud service providers’ ‘try before you buy’ programs, is shifting cloud revenue out of 2020. Cloud had a proof point this year—it worked throughout the pandemic, it scaled up and it scaled down. This proof point will allow for accelerated penetration of cloud through 2022.”

“With revenue uncertainty promoting cash from being king to being emperor, CIOs are now prioritizing IT projects where the time to value is lowest,” he said in the release.

In an interview with TechRepublic, Lovelock explained further: “Back in March when the lockdown happened, the only thing that was going to cause a company to go out of business in 2020 was running out of cash, becoming unprofitable. So everyone started to hoard cash. We saw billions pulled out of lines of credit early.”

SEE: Top tech trends for 2021: Gartner predicts hyperautomation, AI and more will dominate business technology (TechRepublic)

“The same is true in the lease car world where companies are holding onto trucks and cars and facilities equipment longer than they would have to hold onto the cash. But the IT version of that is hard assets. So all of those were frozen. Of course, we also had to implement remote working in this cash freeze time. So the referral away from desktop into ultra premium mobile things like Microsoft Surface, those actually grew this year, overall, in the remote world,” Lovelock said. “We are now going to buy the bigger, faster technology.”

Companies have more to do, and less to do it with. Lovelock said this is similar to what happened in 2009 and 2010 when companies didn’t have a lot of cash and the world was facing a recession. Some companies will be going to the cloud since there is less initial cash outlay.

There will be less growth in devices and communications services, since CIOs want to accelerate their digital business. Infrastructure-as-a-Service (IaaS) and customer relationship management software will help them accomplish this better than mobile phone or printer refreshes, Lovelock said.

SEE: COVID-19 workplace policy (TechRepublic Premium)

Digital transformation now essential for survival

Digital transformation will not need ROI justification from CIOs as it did pre-pandemic, since it will be essential for business survival, he said.

“In the 25 years that Gartner has been forecasting IT spending, never has there been a market with this much volatility,” Lovelock said.

Digital transformation is now essential for business survival.
Image: iStock