COVID-19 to cut IT spending in nearly every industry in 2020
• Tourism, heavy industries, manufacturing to be battered
The International Data Corporation (IDC) currently forecasts worldwide IT spending to decline by 2.7 per cent this year due to the economic impact of the COVID-19 pandemic.
While every industry will be affected by the global slowdown, IDC noted that some will reduce their IT spending more than others.
IDC in its Worldwide ICT Spending Guide: Industry and Company Size, document hospitality and tourism-heavy industries like transportation and personal and consumer services are expected to be the most negatively impacted markets with IT spending expected to decline by 5% or more. However, both markets are relatively small in terms of IT spending. Discrete and process manufacturing are both large market opportunities for technology (nearly $400 billion combined) and face significant risks due to the virus with spending expected to fall by more than 3% in 2020.
Meanwhile, more “recession-resistant” industries like government are predicted to fare a bit better with federal and state/local spending both forecast to increase slightly in 2020. IT spending in the healthcare and telecommunications segments are also forecast to grow slightly as they respond to new demands presented by the pandemic. Professional services will see the strongest growth in IT spending this year with an expected year-over-year increase of 1.7%.
Program Vice President, Customer Insights & Analysis, Jessica Goepfert, said:” While industries that offer digitally-enabled or critical services offer some bright spots, those industries that rely on physical products, and in-person presence, or provide luxury services are struggling.
“Once the near-term reprioritization is underway, the next step is to understand the path to recovery. For instance, industries which have suffered major shutdowns and layoffs will be slower to invest in technology than those that have been able to maintain somewhat normal operations. In order to mitigate risk and exposure to the economic downturn, technology suppliers must reprioritize and refocus their efforts toward the more resilient segments.”
The report further pained a similar picture when looking at IT spending by company size. Small offices (less than 10 employees) and small businesses (10-99 employees) will see the biggest percentage reduction in IT spending this year at 4.9 per cent and 2.7 per cent respectively. However, large businesses (500-999 employees) and very large businesses (more than 1,000 employees) represent a much larger market opportunity. Both segments are forecast to see IT spending fall by more than 1% this year representing a drop of $17 billion.
From a technology perspective, hardware will see the largest decline with spending expected to decline more than five per cent this year as companies pull back on most near-term infrastructure investments. IT services and business services will see a more moderate reduction in spending as companies focus on keeping their existing operations and mission-critical projects going. Software will be the bright spot in technology spending, with the growth of nearly two per cent led by purchases of collaborative applications and content workflow and management applications.
Commenting, the Program Manager, Customer Insights & Analysis, IDC, Serena Da Rold, noted that a
the consequence of the coronavirus outbreak, market conditions are changing fast, driven by daily developments in the pandemic and the response that governments are putting into place
“IDC is supporting clients with more frequent updates to our forecasts across technologies, geographies, industries, and segments. In the April (V1 2020) release, we have provided our first assessment of COVID-19 impact by industry and company size across 120 technologies in 53 countries. The next special release of IDC’s Worldwide ICT Spending Guide: Industry and Company Size is planned for the first week of May,” Da Rold stated.
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