Behind the figures in Gartners latest forecast for worldwide IT spending, there are a number of trends that suggest a shift in the way the IT function operates.
The headline figure from Gartner is that worldwide IT spending is projected to total $4.5tn in 2022, an increase of 5.1% from 2021.
Driven in part by the Covid-19 pandemic, within the enterprise application software market in 2020, spending on cloud-based enterprise software was larger than on-premise enterprise software, said Gartner, and by 2025 the anayst expects it to be double the size of the non-cloud market.
Gartner said spending on cloud-based services is responsible for nearly all of the 11% of spending growth within the enterprise software segment in 2022 as organisations focus on upgrading their software stack to software as a service (SaaS) to support continued flexibility and agility.
John Lovelock, distinguished research vice-president at Gartner, described 2022 as a return to the future for CIOs. They are now in a position to move beyond the critical, short-term projects over the past two years and focus on the long term, he said.
This will lead to a shift in spending, said Lovelock, and over the next three years, spending on IT infrastructure software is set to grow more quickly than applications. Such IT infrastructure provides the tools to enable IT leaders to build new systems, and for Lovelock, CIOs need to reassess which systems they can buy off the shelf, and which need to be built in-house.
Although business software spending is set to increase by 11.1% in 2022 and by 11.9% in 2023 to hit $753bn, CIOs are likely to continue the ongoing debate over whether to build or buy enterprise systems, said Lovelock, adding: No company differentiates by using a better payroll system.
Digitisation is not a commercial packaged application, he said. You cant buy software to differentiate your business. Airbnb, Amazon and eBay transformed how money is made. Creating these internet successes would not have been possible if their founders relied solely on commercial off-the-shelf enterprise software, Lovelock added.
One of the interesting trends highlighted by Gartner is the way spending on servers is shifting. Datacentre systems spending increased by 11.4% in 2021 and is set to rise by 4.7% in 2022 to reach $226bn. In 2019, business bought more servers than the hyperscalers, said Lovelock.
Gartner forecast that enterprise users will spend $53.8bn on servers in 2021, he said, adding: Businesses will never spend that much ever again on servers.
Gartner has forecast that in 2022, businesses will spend $53.7bn on servers, which will decline during the following years to $53.2bn then $53.1bn. By 2025, the hyperscalers will be buying twice as many servers as enterprises, said Lovelock.
This means the hyperscalers and cloud service providers are set to spend $80bn on server hardware compared to enterprise users, which are forecast to spend $50bn on server hardware, he said. But the decline in enterprise server sales is not enough to stymie growth in on-premise datacentres over the next few years.
However, more and more server workloads will be deployed on IT infrastructure operated by service providers and the major public cloud operators, said Lovelock.
With more workloads being pushed into the cloud, CIOs will need to assess what skills they retain in-house and what can be outsourced.
Gartner forecast that the IT services segment which includes consulting and managed services is expected to have the second-highest spending growth in 2022, reaching $1.3tn, up 7.9% from 2021. Through to 2025, organisations will increase their reliance on external consultants, as the greater urgency and accelerated pace of change widen the gap between organisations digital business ambitions and their internal resources and capabilities, said Gartner.
This will be particularly poignant with cloud as it serves as a key element in achieving digital ambitions and supporting hybrid work, said Lovelock. Gartner expects the vast majority of large organisations to use external consultants to develop their cloud strategy over the next few years.
Lovelock said that staff skills gaps, wage inflation and the war for talent will push CIOs to rely more on consultancies and managed service firms to pursue their digital strategies. Cloud computing has driven up demand for IT skills, he pointed out, and the industry has not been able to train people at the pace needed to meet this demand.
We have too many open positions and too few people to fill them, said Lovelock. Gartner found that half of all tech vacancies have been open for six months or more.
Gartners findings on the growing skills crisis are mirrored by Adrian Bradley, a partner in KPMGs technology practice specialising in cloud transformation. Talent is the number one challenge of the IT sector, he said. There are not enough people with cloud skills to meet demand.
In Bradleys experience, it is hard to reskill people who have worked exclusively operating on-premise enterprise IT hardware. Outsourcing is the easiest way to achieve this, but there is a need to have sufficient management skills to oversee it, he added.
The challenge across the IT sector is that as more enterprises turn to IT professional services to fill the cloud computing skills gap, it will become increasingly difficult to hire IT people with the right skills, and CIOs are likely to be competing on vacancies with the largest IT professional services firms.
Smaller IT service providers are also likely to struggle to find the right technical skills to support their customers, said Lovelock, who urged CIOs to rebalance the type of work technical employees do by providing training and outsourcing IT commoditised tasks.
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