Enterprise software, devices to drive 2021 IT spending to $4.1T

Global information technology spending will grow 8.4% to $4.1 trillion in 2021, driven in part by enterprises accelerating their digital transformation plans, Gartner said in its latest IT spending forecast.

IT spending will be driven by digital business plans that will be refined and completed in 2021, Gartner said. More digital initiatives are originating from business departments outside of IT, making IT a full participant in business value delivery, said John-David Lovelock, a distinguished research vice-president at Gartner. As a result, Gartner expects to see the source of funding to be charged as a cost of revenue or cost of goods sold (COGS).

The source of funding changes “from an overhead expense that is maintained, monitored and sometimes cut, to the thing that drives revenue,” Lovelock said in the press release.

All-around solid growth

Every IT spending category is expected to have positive growth through 2022, Gartner said. Device demand will show the most growth, at 14%, followed by enterprise software, at 10.8%. Every category will show solid growth in 2021, as “organizations focus on providing a more comfortable, innovative and productive environment for their workforce,” the company asserted.

For example, organizations are focusing on areas such as social software and collaboration platforms and human capital management (HCM) software to improve employee experience and well-being, Gartner said.

Organizations will still focus on optimizing costs and other cost-savings efforts, but the IT spending focus in 2021 will be on revenue growth because there’s more economic certainty, according to the report. “Last year, IT spending took the form of a ‘knee jerk’ reaction to enable a remote workforce in a matter of weeks. As hybrid work takes hold, CIOs will focus on spending that enables innovation, not just task completion,” Lovelock said.

Quick recovery expected

IT spending took a hit in 2020, but Gartner estimated that IT spending in nearly every industry sector will recover and surpass 2019 levels within the next few years. Some sectors and regions will recover sooner than others, which will result in a “K-shape economic recovery,” Gartner said in its release.

From an industry perspective, banks and financial services IT spending will reach 2019 levels as early as 2021. Retail and manufacturing IT spending will recover at a slower pace, and will not recover to pre-pandemic levels until about 2023. In an interview with VentureBeat, Lovelock was able to go in a bit more detail, noting that most sectors would return to 2019 levels of spending at some point in 2021. Government IT spending was back to 2019 levels exceptionally early, hitting that mark in mid-2020, Lovelock told VentureBeat. Transportation, however, is not expected to really recover until closer to 2025.

There are also regional differences. China has already recovered, while Gartner estimates that North America and Western Europe will see IT spending recover in late 2021. Middle East/North Africa also has a quicker recovery path, Lovelock told VentureBeat. There were some variations in Asia, with “mature” Asia/Pacific markets expected to see their spending reach 2019 levels in early 2021, compared to “emerging” Asia/Pacific markets looking closer to 2022, Lovelock said. Latin America IT spending will grow much slowly, with Gartner predicting recovery around 2024.

Regional recovery will also likely be influenced by what kind of industry is the most dominant in that region. Countries that may be more manufacturing-heavy will lag behind countries that have a mix of industry sectors, Lovelock said.