Taking IT Spending Forecasts With a Grain of Salt

The IT spending growth projections by major analyst firms are pointing toward a good year for those making and selling technology products, but the numbers are only directional. We’ll explain why.

By Larry Walsh

The IT growth forecasts are in, and the consensus is that the market is not just healthy but soaring and gaining steam. IDC has a conservative forecast, pegging IT spending growth at 4.2% to 4.5%. Canalys placed a marker at 6.2%. Gartner projects spending at 6.8% (it previously said 10.8%). And the expectations are that IT spending will fall between 8% and 9% in 2025.

Here, I’m going to invoke the immortal words of Illinois Senator Everett McKinley Dirksen talking about government spending, “A billion here, a billion there, and before you know it, you’re talking about real money.” We could say the same thing about IT spending forecast numbers; throw enough around and they start to feel real.

Certainly, particular technology segments are growing at fantastic rates.

The fledgling artificial intelligence category will grow about 55% this year. Cloud computing — infrastructure and platform services — will climb about 22%. And data center equipment — servers, storage, and switches — will expand 11%. Not bad numbers.

The market, though, isn’t healthy. Germany, Japan, the United Kingdom, and much of Eastern Europe are in recession. France, Italy, and Spain are teetering on recession. And China, which is seeing its economy sink, is flooding the global markets with cheap goods to prop up its flagging real estate and financial service markets.

The partner community isn’t feeling optimistic about 2024. According to the Channelnomics 2024 Channel Forecast, partner confidence is down for the second year in a row even though the vast majority of resellers, integrators, and service providers believe their revenue and profits will increase this year. The dampened confidence is due largely to negative sentiment regarding macroeconomic trends that lie outside their control.

We have to keep the macroeconomic trends in perspective when looking at IT spending growth projections. IDC says that even if GDP goes to zero, IT spending will still increase about 3% as businesses will need to offset rising costs and lower revenue with automation.

Investors, vendors, and partners rely on these forecasts to inform their strategic planning and make sound business decisions. But these numbers are constantly in flux. For example, in 2022, Gartner started the year with a robust 5.3% growth forecast. Each quarter, it cut the outlook by a full percentage point. By the end of the fourth quarter, Gartner called the ball at 0.8%.

Last July, Gartner released an update to its 2023 forecast, saying IT spending would increase 4.3% in full-year 2023. In October 2022, the forecast was 5.1%. Then, in December, it was revised to 2.5%. In April 2023, it was back up to 5.5%. At the end of 2023, Gartner closed the growth number at 3.3%.

Gartner isn’t the only market analyst firm with wildly fluctuating growth projections. Every analyst firm will adjust its short-term numbers based on changing market conditions. And, let’s face it, the market can shift dramatically from quarter to quarter.

Channelnomics doesn’t forecast IT spending numbers. We leave that to our better-equipped market analyst firms. Instead, we make general prognostications based on prevailing trends. Our forecast remains the same: The first half of 2024 will resemble the conditions and performance experienced in 2023; the second half of 2024 will see substantial improvement. And we’re expecting robust and high growth in IT spending in 2025 and, potentially, 2026 led by investments in artificial intelligence, data management services, and infrastructure refreshes.

As the famed fortune teller The Amazing Criswell said, “You are interested in the unknown, the mysterious, the unexplainable. That is why you are here.” Data and market analytics are how we dispel the mystery of what’s to come next. Unfortunately, the future is not written in stone, and conditions will change like the weather. Therefore, we should always take growth projections as “directional” and not absolute.

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