Gartner: Data center spending will inch up this year

After a down year in 2019, IT spending will pick up this year, led by enterprise software and the cloud, according to IT research firm Gartner, including an uptick for data center spending that had taken a dip.

Gartner: Data center spending will inch up this year
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Global IT spending could reach $3.865 trillion in 2020, up 3.4% over 2019, according to newly released data from IT research firm Gartner. In comparison, 2019 saw just 0.5% growth over 2018 levels. Spending is expected to continue to climb into 2021, surpassing the $4 trillion mark with 3.7% growth.

Spending on hardware – including edge devices and data center hardware – will be de-emphasized, while investments in software and services, including cloud, will see an increase, the firm predicts.

"With the waning of global uncertainties, businesses are redoubling investments in IT as they anticipate revenue growth, but their spending patterns are continually shifting," said John-David Lovelock, distinguished research vice president at Gartner, in a statement.

After a decline of 2.7% in 2019, data center systems sales will grow 1.9% in 2020, while devices – everything from laptops to printers to smartphones – will rise just 0.8% in 2020 after a 4.3% decline in 2019.

IT services will rise 5.0%, increasing its momentum over 2019, which saw a rise of 3.6%. But the real action will be in enterprise software, which is expected to grow 10.5% this year. This includes both on-premises software (such as Microsoft, Oracle) and cloud services. More of the spending growth is aimed at SaaS than on-premises software, Gartner notes.

"Almost all of the market segments with enterprise software are being driven by the adoption of software as a service (SaaS)," Lovelock said. "We even expect spending on forms of software that are not cloud to continue to grow, albeit at a slower rate. SaaS is gaining more of the new spending, although licensed-based software will still be purchased and its use expanded through 2023."

In a conference call with clients, Lovelock said there has been a shift over the last three years, where the world is going from "'we like all tech' to 'we like softer tech and not all tech.'" The trend is toward consulting, software, and the cloud, the softest of tech.

The weakest segment is mobile devices. It's not that people don’t want them any longer, but in the mobile device space there is no more must-have feature, nothing to make people line up for days in advance like we saw a decade ago with each new iPhone release. "People are happy with the devices they have. The market is down to a replacement market so they extend their spending," Lovelock said.

In data center space, there's a similar pattern. Servers last longer, and at the same time, more work is being done outside the company at colocations and the cloud.

"The cloud is taking a lot [of money] out of the data center," Lovelock said. "SaaS and IaaS are all viable for organizations but taking data center dollars. Where we keep saying software is growing most quickly, that’s very true. But recognize that it is also taking money from other areas. Budgets aren’t going up, concentrations in spending is where we are seeing things happen."

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