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)
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 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.
“Technology has a huge impact on their travel choices. From seeking information, making booking arrangements and paying. They do everything on their mobile phones.”
Lisa Li managing director of China Travel Services New Zealand, talking about young Chinese millennial vistors to New Zealand
Paper missing in action
There’s research showing the overwhelming majority of that millennial group has not picked up a single piece of paper media in over a year.
— Tourism New Zealand general manager Rebecca Ingram
“Just over two years ago we signed an agreement with Alibaba Group.
“We wanted to get value from the Chinese market while also ensuring Chinese visitors had a good experience in the country. Part of that was us supporting a roll-out of Alipay.
…only 13 percent of Chinese visitors have credit cards. If they weren’t able to transact in the way they are used to, we would be leaving money on the table and they’d have a poorer experience when they came. “
Early adopters must own the latest devices. They run ahead of the pack. They upgrade devices and software before everyone else.
Early adopters use the latest phones. They buy cars with weird features. They queue up in the wee small hours for iPhones, iPads or games consoles. Back in the day they’d go to midnight store openings to get the newest version of Microsoft Windows a few hours earlier.
Their computers never work because they are awash in beta and alpha versions of software screwing things up.
Computer makers depend on early adopters. They use them as guinea pigs.
Early adopters first to benefit
Marketing types will tell you early adopters will buy a product first to steal a march over the rest of humanity. They claim they will be the first to reap the benefits of the new product. It will make them more productive or live more enjoyable lives.
This can be true. Yet early adopters often face the trauma of getting unfinished, unpolished products to work. Often before manufacturer support teams have learnt the wrinkles of their new products.
There’s another reason computer makers love early adopters — they pay more for.
New products usually hit the market with a premium price. Once a product matures, the bugs eliminated and competition appears, profit margins are slimmer.
Companies use high-paying early adopters to fund their product development.
Being an early adopter is fine if you enjoy playing with digital toys. If productivity isn’t as important to you as being cool. If you have the time and money to waste making them work.
I don’t. I prefer to let others try things first. Let computer makers and software developers iron out the wrinkles while the product proves its worth. Then I’ll turn up with my money.
Communications services is the top technology category in New Zealand. Customers will spend a total of NZ$4.4 billion this year.The category includes consumer fixed and mobile voice and data services, enterprise fixed and mobile voice and data services. It may be the biggest sector, but shows next to no growth.
Gartner expects software to be the star performer over the next year, with IT services also showing respectable growth. Sales of devices and data centre systems will be flat.
Australians spend more however you cut it
New Zealand’s numbers compare with a total IT spend of A$83 billion in Australia, almost eight times the amount spent here. Australia’s communications services sector is around six times the size of New Zealand’s at A$26.8 billion.
In part the difference between Australia and New Zealand can be put down to population size. Yet there’s more to the numbers than how many people live in each country. New Zealand’s spend amounts to around NZ$2,500 per person, while Australia’s is almost A$3,500.
One possible explaination for some of the difference is that some Australian IT companies wrap New Zealand revenue into local income. And there’s a tendency on the other side of the Tasman to gold-plate projects. Yet you can’t escape from thinking Australians appear more willing to invest in technology.
New Zealand: IT Spending Forecast (Millions of NZ$)
Gartner says NZ IT spending will reach NZ$11.4 billion in 2017. That’s up 2.3 percent on last year.
This is less than the expected 2.7 percent rise in global IT spending.
The reason for New Zealand’s underperformance is that nation’s biggest IT spending category is fixed and mobile communications services. It accounts for almost 40 percent of all NZ IT spending.
Gartner says growth in this sector is likely to be flat over the next two years.
In 2016 we spent NZ$4.36 billion on fixed and mobile communications services. Gartner’s projection puts 2017 spending at NZ$4.38 billion. That’s a rise of about 0.6 percent. The estimate for 2018 is NZ$4.43 billion.
Meanwhile spending on software will rise from NZ$1.4 billion last year to NZ$1.5 billion in 2017 and will reach almost NZ$1.7 billion in 2018.
Data Center Systems
Gartner – all numbers in thousands of NZ dollars
Australia’s largest sector is IT services. Gartner says software will be the fastest growing sector in 2017 for both New Zealand and Australia.
Gartner research vice president John-David Lovelock says the uncertainty means there’s a wait-and-see mood with many enterprises forestalling IT investments.
Cloud, blockchain, AI all trending
He identifies the big trends as cloud, blockchain, digital business and artificial intelligence.
The analyst expects worldwide spending on devices, PCs, tablets and phones to stay flat at US$589 billion.
Gartner says a PC replacement cycle, strong pricing and functionality will help drive growth in 2018.
We’ve seen similar optimistic projections before now. Some from Gartner. It’s hard to know where that replacement cycle will come from. Technology sales have been falling for years now. Even if it does kick-in, the industry needs more than replacements to see a fresh wave of growth.
Things are strong in the IT services market. Gartner expects the global market to grow 4.2 percent in 2017. It says this will come from investments in digital business, intelligent automation and services optimisation. The report goes on to warn buyers remain cautious.