Research firm IDC said it is forecasting worldwide IT spending to decline 2.7% this year due to the economic impact of the Covid-19 pandemic. While every industry will be affected by the global slowdown, some will reduce their IT spending more than others, according to the analyst firm.
Not surprisingly, 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%.
“While industries that offer digitally-enabled or critical services offer some bright spots, those industries that rely on physical products, an in-person presence, or provide luxury services are struggling,” said Jessica Goepfert, program vice president for customer insights and analysis at IDC.
“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.”
A similar picture emerges 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% and 2.7% 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 5% 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 growth of nearly 2% led by purchases of collaborative applications and content workflow and management applications.
“As a 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,” said Serena Da Rold, program manager for customer insights and analysis at IDC.