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Strategic Digital Transformation Spending Trends

Looking ahead, many Chief Executive Officers (CEOs) continue to selectively invest in new strategic digital transformation projects that enable a significant competitive advantage. Some additional investments may go towards improving existing IT infrastructure and operations. 

Worldwide IT spending is now projected to total $4.5 trillion in 2022 -- that's an increase of 3 percent from 2021, according to the latest updated estimate by Gartner. For now, most CIOs will be relieved that their budget is safe from major cuts.

While IT spending is expected to grow in 2022, it will be at a slower pace than in 2021 -- partly due to a 5 percent cutback on spending for personal computers, media tablets, and printers.

Digital Transformation Market Development

"Central banks around the world are focusing on fighting inflation, with overall inflation rates expected to be reduced through the end of 2023. However, the current levels of volatility being seen in both inflation and currency exchange rates is not expected to deter CIOs’ investment plans for 2022," said John-David Lovelock, vice president at Gartner.

According to the Gartner market assessment, organizations that do not invest in the short term will likely fall behind in the medium term and risk not being around in the long term.

Price increases and delivery uncertainty have accelerated the transition in purchasing preference among CIOs, and enterprises in general, from IT ownership to IT services -- pushing cloud computing spending to 18.4 percent growth in 2021.

Moreover, cloud services are expected to grow by 22.1 percent in 2022. Not only is cloud service demand reshaping the IT services industry, but it is also driving spending on servers to 16.6 percent growth in 2022, as hyperscalers build out their data centers.

Spending on data center systems is forecast to experience the strongest growth of all segments in 2022 at 11.1 percent. Cloud consulting and implementation and cloud computing managed services are expected to grow 17.2 percent in 2022, from $217 billion in 2021 to $255 billion in 2022, helping to drive the overall IT services segment to 6.2 percent growth in 2022.

Furthermore, the critical IT skills shortage being felt across the globe is expected to abate by the end of 2023 when the corporate drive to complete digital transformations slows down and there has been time for upskilling and reskilling of existing staff.

However, in the near term, Gartner analysts believe that CIOs will be forced to take action to balance increased IT demand and the likely dwindling of IT staffing levels over time.

Clearly, the current IT labor market continues to tighten, making it difficult to attract and retain talent. A Gartner survey of nearly 18,000 employees in the first quarter of 2022 showed compensation is the top driver for IT talent attraction and retention.

Therefore, tech service providers are increasing prices on IT to allow them to offer competitive salaries. This is driving an increase in spending on software and services through 2022 and 2023.

Worldwide software spending is expected to grow 9.6 percent to $806.8 billion in 2022, and global spending on IT services is forecast to reach $1.3 trillion this year.

Outlook for IT Services in 2022 and Beyond

"Additionally, CIOs are using more IT services to assist in the lack of skilled IT staff. Tasks that require lower skill sets tend to be outsourced to managed service firms to alleviate staff time, while critical strategy work, which requires high-end skills unobtainable by many enterprises, will increasingly be fulfilled by external consultants," said Lovelock.

That said, I believe some IT vendors will also offer comprehensive professional services for complex projects, such as the enhancement of infrastructure and associated SaaS offerings to support the delivery of secure digital workspace solutions for remote working employees.

While some traditional employers will try and enforce return-to-office mandates, other more forward-looking organizations are already increasing their IT services for the anticipated growth of distributed workforce hiring during the coming months.

Flexible working model adoption continues to gain momentum, worldwide.

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