It’s really about solving customer challenges, said NWN Carousel’s CEO, Jim Sullivan
As seen on CRN.
By Mark Haranas.
Here are the top five market segments that will reap the most sales in 2023 and 2024, according to new data from Gartner, as global IT spending is projected to reach $4.6 trillion this year.
From nearly $1.5 trillion in communications services revenue to $224 billion in data center systems spending, worldwide spending in the tech industry is expected to increase more than 5 percent annually in 2023.
The global IT market is projected to reach $4.6 trillion this year, up from $4.4 trillion in 2022, despite continued economic turbulence such as high inflation rates, according to IT research firm Gartner.
“Macroeconomic headwinds are not slowing digital transformation,” said John-David Lovelock, distinguished vice president analyst at Gartner, in a statement. The top five spending areas in 2023 are communications services, software, devices, data center systems and IT services, the latter of which is expected to increase by 9 percent this year.
Gartner: Tech ‘Spending Will Remain Strong’
Before breaking down the IT spending figures for 2022, 2023 and 2024 in each market segment, it’s key to note why Gartner is expecting the tech market to reap sales of $4.6 trillion this year, which would represent a 5.5 percent year-over-year growth rate.
The IT research firm said that even with tech layoffs slamming the industry in 2023, there is still a shortage of skilled IT experts, which is why markets like IT services and communications services will both well exceed $1 trillion in revenue.
Cloud communications and IT services company NWN Carousel is expecting double-digit sales growth in 2023 as its enterprise customers’ need for digital transformation and hybrid work solutions grows.
“Our markets are growing really well for us,” NWN Carousel CEO Jim Sullivan told CRN. “It’s really all about solving customer challenges today because enterprises need real solutions. [Revenue] growth really takes care of itself if you deliver customer outcomes.”
In addition, Gartner said IT “spending will remain strong” even as many countries across the globe are projected to have near-flat gross domestic product growth (GDP) and high inflation in 2023. “Prioritization will be critical as CIOs look to optimize spend while using digital technology to transform the company’s value proposition, revenue and client interactions,” said Gartner’s Lovelock.
CRN breaks down Gartner’s new IT spending numbers for 2022, as well as the tech forecast spending for 2023 and 2024.
No. 5: Data Center Systems
2022: $216 billion
2023: $224 billion
2024: $238 billion
Once front and center in the global technology landscape, data center systems have taken a back seat to technology services and software.
The data center systems market ranks No. 5 on Gartner’s list of IT spending markets, expected to increase 3.7 percent in 2023 compared with 2022. Data center systems sales this year will reach $224 billion, according to Gartner data.
In 2024, the data center systems market is expected to increase by 6.1 percent year over year to $238 billion.
As enterprises navigate continued economic turbulence, the split of technologies being maintained versus those driving the business is apparent in their position relative to overall average IT spending growth, according to Gartner. “For example, there is sufficient spending within data center markets to maintain existing on-premises data centers, but new spending has shifted to cloud options, as reflected in the growth in IT services [versus data center systems],” said Gartner’s Lovelock.
No. 4: Devices
2022: $717 billion
2023: $684 billion
2024: $759 billion
The device market is the only IT segment on Gartner’s list that will see a decrease in spending in 2023 compared with 2022. However, device sales are expected to bounce back in 2024.
Spending on IT devices will decline by 4.6 percent this year to $684 billion, down from $717 billion in 2022. This drop in sales is much less than the 10.7 percent decline year over year in device sales in 2022 compared with 2021.
Gartner said it expects the devices market to decline in 2023 “as consumers defer device purchases due to declining purchasing power and a lack of incentive to buy.”
However, it is key to note that the device industry will return to positive growth in 2024. Gartner expects device spending to increase by 11 percent year over year in 2024 to $759 billion.
No. 3: Software
2022: $794 billion
2023: $891 billion
2024: $1 trillion
The fastest-growing IT market segment in 2023 will be software, which will reach $891 billion this year, according to Gartner.
“The software segment will see double-digit growth this year as enterprises prioritize spending to capture competitive advantages through increased productivity, automation and other software-driven transformation initiatives,” said Gartner.
Worldwide software sales are expected to increase by 12.3 percent in 2023 compared with 2022.
Business spending on software isn’t showing any signs of slowing down next year either. In fact, Gartner predicts the software industry will grow at a faster rate than any other IT segment in 2024.
Spending on software is expected to increase over 13 percent year over year in 2024 compared with this year, surpassing over $1 trillion in spending.
No. 2: IT Services
2022: $1.25 trillion
2023: $1.36 trillion
2024: $1.50 trillion
There are two market segments that stand well above the rest in terms of businesses’ IT spending budgets. One of these is IT services, expected to reach $1.36 trillion in sales this year, up 9.1 percent year over year.
The constant growth in IT services is largely driven by the Infrastructure as-a-Service (IaaS) market, which is projected to grow over 30 percent year over year in 2023. Gartner said, for the first time ever, price is a “key driver” of increased spend for cloud services segments, rather than just increased usage.
For 2024, spending on IT services is expected to increase again to over $1.50 trillion, which would represent an annual growth increase of 10.2 percent. Gartner predicts that spending on IT services in 2024 will narrow the gap between IT services and the top communications services market segment.
No. 1: Communications Services
2022: $1.42 trillion
2023: $1.48 trillion
2024: $1.54 trillion
The No. 1 market that will see businesses pour nearly $1.5 trillion into this year is communications services. The need for communications services in the new world of hybrid work is critical for companies of all shapes and sizes across the globe.
The communications services market is expected to grow about 4 percent year over year to $1.48 trillion in 2023, making it more than double the device market and six times larger than the data center systems market this year.
Even as layoffs continue to impact the tech industry, there is still a critical shortage of skilled IT labor. The demand for tech talent greatly outweighs the supply, which will continue until at least 2026, Gartner said.
“IT spending on internal services is slowing in all industries, and enterprises are not keeping up with wage rate increases. As a result, enterprises will spend more money to retain fewer staff and will turn to IT services firms to fill in the gaps,” said Gartner’s Lovelock.
In 2024, the communications services market is projected to increase 3.8 percent year over year to $1.54 trillion.