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IT spending set to fall 7 percent this year

New Zealand’s spending on information technology is set to drop by 7.3 percent when compared with 2019. Gartner, a research firm, forecasts IT spending will be less than NZ$12.6 billion. This is a billion dollars less than last year.

While the drop is significant, New Zealand will fare slightly better than most of the world. Gartner forecasts the worldwide spend will drop eight percent. Australia faces a six percent fall.

The drop is a direct result of the Covid–19 pandemic and the expected international recession that will follow.

Critical IT a priority

Gartner says companies around the world are prioritising spending on mission critical technologies and services. For now they are shelving their growth or digital transformation projects.

       
New Zealand IT Spending Forecast (Millions of New Zealand Dollars)
New Zealand2019Growth2020Growth
Data Centre4051.0%347-14.3%
Enterprise Software2,19612.1%2,113-3.8%
Devices1,950-0.3%1,646-15.6%
IT Services3,9894.9%3,799-4.8%
Communications Services5,0250.1%4,665-7.2%
Overall IT13,5653.3%12,570-7.3%
 

Analyst John-David Lovelock says the bright spot in the international forecast is spending on public cloud services. This includes messaging, telephony and conferencing. This is not forecast to do as well in New Zealand.

The sharpest drop in New Zealand is expected in purchases of digital devices. Gartner forecasts a massive 15.6 percent fall in spending down to $1.6 billion. Last year it was the only sector to show negative growth. The fall is in line with the worldwide trend.

Gartner forecasts an equally steep 14.3 percent drop in spending on data centres, although the absolute value of the segment is far lower. This year it will fall from $405 million to $347 million.

Communications

Communications services will fall 7.2 percent according to Gartner. This is well ahead of the 4.5 percent worldwide figure.

Lovelock says he doesn’t see a recovery until the third quarter of 2021. Moreover he says it will take until 2024 for the economy to get back on its long term track.

He says: “Recovery will not follow previous patterns as the forces behind this recession will create both supply side and demand side shocks as the public health, social and commercial restrictions begin to lessen.”

Lovelock also warns not to expect a V shaped recover. Which also means it isn’t going to be quick. IT may be in better shape than many other sectors but we’re in for a bumpy ride.

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