08 Aug Software and IT services lead US$5.1 trillion tech market in 2024
Research firm Gartner expects worldwide IT spending to reach over US$5.1 trillion in 2024 as businesses buy automation and efficiency technologies to drive growth at scale with fewer employees.
“Digital business transformations are beginning to morph,” said John-David Lovelock, distinguished vice president analyst at Gartner.
“IT projects are shifting from a focus on external-facing deliverables such as revenue and customer experience, to more inward-facing efforts focused on optimisation.”
Worldwide spending on IT—such as software and communications services—will increase by 4.3 per cent this year, reaching US$4.7 trillion in 2023 compared to US$4.5 trillion in 2022, according to new data from Gartner. Global IT spending is projected to increase by a whopping 8.8 per cent in 2024, hitting approximately US$5.13 trillion next year. The top five largest global IT markets that will generate the most revenue are: IT services, software, communication services, devices and data centre systems.
Gartner says while some of these markets are expected to shrink in 2023, all five will rebound in 2024 in terms of sales. For example, the software market will see double-digit growth in 2023 with global spending levels reaching US$911 billion, up 13.5 per cent compared to 2022. Vendor price increases will also continue to bolster software spending through this year, Gartner reports.
Comparatively, spending on devices will drop nearly 9 per cent in 2023 compared to last year due to the impact of consumer inflation.Gartner said its IT spending forecast methodology relies heavily on rigorous analysis of the sales by over a thousand vendors across the entire range of IT products and services.
Data centre systems
- 2022: US$221 Billion
- 2023: US$218 Billion
- 2024: US$235 Billion
Data centre systems annual sales on a global basis spiked nearly 17 per cent in 2022 to US$221 billion as companies continued to spend millions on infrastructure and hardware to support their new hybrid workforce and digital transformation projects.
That spending level is cooling down this year, according to Gartner, with data centre systems sales falling 1.5 per cent to US$218 billion in 2023. However, data centre hardware spending is expected to bounce back in 2024 by growing 8.1 per cent to US$235 billion
Devices
- 2022: US$766 Billion
- 2023: US$700 Billion
- 2024: US$748 Billion
While the overall outlook for enterprise IT spending is positive in 2023, spending on devices will decline 8.6 per cent to US$700 billion in 2023 due to the ongoing impact of inflation on consumer purchasing power.
“The devices segment is experiencing one of its worst growth years on record,” said Gartner’s Lovelock.
“Even as inflation eases slightly in some regions, macroeconomic factors are still negatively impacting discretionary spending and lengthening device refresh cycles.”
Worldwide spending on devices also declined 6.3 per cent in 2022 to US$766 billion compared to 2021. However, the devices market will begin to somewhat bounce back in 2024 with spending expected to increase by 3.8 per cent annually to US$748 billion.
“Devices spending is not expected to recover to 2021 levels until at least 2026,” said Lovelock.
Software
- 2022: US$803 Billion
- 2023: US$912 Billion
- 2024: US$1.04 Trillion
The fastest-growing market in IT is software with businesses expected to spend US$912 billion in 2023, up 13.5 per cent compared to 2022.
In 2024, spending on software will increase again by a whopping 14 per cent on a global basis, reaching US$1.04 trillion next year.The software segment is witnessing double-digit growth in 2023 as organisations increase utilisation and reallocate spending to core applications and platforms that support efficiency gains—such as enterprise resource planning (ERP) and customer relationship management (CRM) applications. Vendor price increases will also continue to bolster software spending through this year, Gartner said.
Communications services
- 2022: US$1.42 Trillion
- 2023: US$1.46 Trillion
- 2024: US$1.52 Trillion
The largest IT market in 2023 revolves around communications services which is set to reach US$1.46 trillion, representing a 2.7 increase in spending compared to last year. The communications services market is expected to growth again by 3.8 per cent in 2024 with spending levels reaching a record US$1.52 trillion, Gartner said. The communications services market is led by both channel partners—such as Accenture, DXC Technology, Wipro and Tata Consultancy Services (TCS)—as well as communications services providers.
This market has typically been the largest IT spending market in the world for years, but Gartner expects it will be surpassed by IT services by 2024.
IT services
- 2022: US$1.31 Trillion
- 2023: US$1.42 Trillion
- 2024: US$1.58 Trillion
IT services will become the largest market next year thanks to a nearly 12 per cent growth increase in spending, Gartner estimates, as worldwide spending on IT services will reach US$1.58 trillion in 2024. The IT services market has continuously grown in the high single-digits year after year as businesses seek more services from channel partners and vendors.
In 2022, spending on IT services increased 7.5 per cent to US$1.31 trillion. This year, global spending on IT services is expected to grow annually by 8.8 per cent to US$1.42 trillion. Gartner said generative artificial intelligence (AI) is expected to boost the IT services market as the new technology will be primarily incorporated into enterprises through existing spending.
“Generative AI’s best channel to market is through the software, hardware and services that organisations are already using,” said Lovelock.
“Every year, new features are added to tech products and services as add-ons or upgrades.”
With organisations spending US$1.58 trillion in 2024 on IT services, Gartner projects this market to generate the most revenue on a worldwide basis next year.