New forecast by IDC projects worldwide IT spending will hit nearly $5 trillion annually by 2023
As global and regional markets brace for an inevitable recession sparked by slowing consumption and the impact of trade wars between the United States and China, IDC has a hint of good news for the technology market: Spending will continue to increase at a healthy rate for the next four years, reaching nearly $5 trillion annually by 2023.
The Lowdown: The new five-year forecast by the market analyst firm projects worldwide IT spending will continue to expand at a compound annual growth rate (CAGR) of 3.8% between 2019 and 2023. The faster-than-market rate will happen despite the impact of global economic slowdowns and the impact of tariffs resulting from the ongoing trade war between the U.S. and China. The driver of economic expansion: digital transformation.
The Details: According to IDC, commercial – or business – technology spending will expand at a CAGR of 5.1% through 2023. Business investments in technologies and services that facilitate digital transformation of operations and go-to-market infrastructure will drive most of the spending. The United States will remain the largest technology market in the world with spending topping $1.66 trillion by 2023. Western Europe will remain the second-largest market with spending tallying $927 billion. And China will be the third-largest IT market with $618 billion; China is also the fastest-growing market with a 6.1% CAGR.
While business technology spending will remain healthy, consumer spending will lag over the next five years, IDC says. Consumer tech – dominated by smartphones, mobile devices, and Internet services – will grow at a CAGR of just 1.5% over the next five years.
The Impact: The IDC forecast is good news for technology vendors and solution providers, which are cautiously watching economic trends and signs to understand the potential impact of a recession. During the 2008-2009 economic collapse, the technology segment bled tens of thousands of jobs as consumers and businesses rapidly cut spending on core technologies and services. The technology market didn’t fully recover for nearly four years. If the IDC forecast holds true, the technology market and channel should fare well amid economic headwinds and, if it comes to pass, a recession.
The Buzz: “Global market conditions remain volatile, and although the economy has performed broadly better than expected in the past six months in many countries, a sense of uncertainty over the short-term economic and business outlook has been rising at the same time,” said Serena Da Rold, program manager in IDC’s Customer Insights and Analysis group. “Confidence indicators are fluctuating on a monthly basis, depending on short-term indicators ranging from speculation over tariffs and trade wars to political wild cards, with a potential global slowdown looming for 2019 and 2020. End-user surveys reflect the impact of this uncertainty on business decision-making, but our forecasts remain roughly stable overall for 2019 compared with our previous release, and slightly accelerated in the medium term, driven by stronger growth in software and hardware. Digital transformation and the adoption of automation technologies will be driving investments in applications, analytics, middleware, and data management software, as well as increasing demand for server and storage capacity.”
Channelnomics Point of View: While the IDC forecast is optimistic, it’s not certain. IDC concedes that variables making up its forecast fluctuate on a monthly basis. Even if IT spending continues to expand at a faster-than-market rate, a recession could have a significant impact on the IT channel. IT spending is not uniform, and solution providers that are not working in expanding segments – cloud computing, Internet of Things, digital transformation – could find themselves in an increasingly competitive and deteriorating market position.