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Friday, June 07, 2019

How Cloud and AI Influence IT Investment Strategy

The pace of change from a traditional capital-intensive IT infrastructure model to a more flexible hybrid multi-cloud services model is influencing enterprise spending trends across the globe.

Worldwide IT spending is forecast to total $3.79 trillion in 2019 -- that's an increase of just 1.1 percent from 2018, according to the latest global market study by Gartner.

IT Infrastructure Market Development

"Currency headwinds fueled by the strengthening U.S. dollar have caused us to revise our 2019 IT spending forecast down from the previous quarter," said John-David Lovelock, vice president at Gartner. "Through the remainder of 2019, the U.S. dollar is expected to trend stronger, while enduring tremendous volatility due to uncertain economic and political environments and trade wars."

In 2019, technology product managers will have to get more strategic with their portfolio mix by balancing products and services that will post growth in 2019 with those larger markets that will trend flat to down.

According to the Gartner assessment, successful IT product managers in 2020 will have had a long-term view of the changes made in 2019.

The data center systems segment will experience the largest decline in 2019 with a decrease of 2.8 percent. This is mainly due to the expected lower average selling prices (ASPs) in the server market driven by adjustments in the pattern of expected component costs.

Moreover, the shift of enterprise IT spending from traditional (non-cloud) offerings to new, cloud-based alternatives is continuing to drive growth in the enterprise software market.

In 2019, the market is forecast to reach $427 billion -- that's up 7.1 percent from $399 billion in 2018. The largest cloud shift has so far occurred in application software.

However, Gartner expects increased growth for the infrastructure software segment in the near-term, particularly in integration platform as a service (iPaaS) and application platform as a service (aPaaS).

"The choices CIOs make about technology investments are essential to the success of a digital business. Disruptive emerging technologies, such as artificial intelligence (AI), will reshape business models as well as the economics of public- and private-sector enterprises. AI is having a major effect on IT spending, although its role is often misunderstood," said Mr. Lovelock.

Outlook for AI Applications Spending Growth

Gartner believes that AI is not a product, it is really a set of techniques or a computer engineering discipline. As such, AI is being embedded in many existing products and services, as well as being central to new development efforts in every industry.

Gartner’s AI business value forecast predicts that organizations will receive $1.9 trillion worth of benefit from the use of AI this year alone.