An Insight into Gartner's Global IT Spending Forecast

Information technology is integral to all enterprises, providing agility, security and competitive advantage. The future will undoubtedly rely heavily on cutting-edge technological innovations and information technology to reinforce the statement.

Gartner's forecast for IT spending reveals that spending will soar higher and predicts that the in-house legal sector will have threefold spending on legal technology by 2025, reducing outside dependencies, modernising, digitising, and automating legal work. 

There will be challenges including inflation, shortage of talent due to Covid-19 and the Russia-Ukraine war. CIOs will aim to remain agile during disruptions and the technology leaders that see the critical market signals and act accordingly will fare much better.

Technology need 

Technology is an essential element of any business's success. Enterprises need to continually review the systems, processes, and technology that enables them. 

IT Budgets: Why you need to continually invest in your IT systems (quostar.com) points at the following advantages: 

• Competitive advantage: Efficiency and productivity are critical to any enterprise. With changing technology landscape, the need for investing in IT is inevitable. 
• Business agility: Change is inevitable and it is the essential in the business environment. Cloud, artificial intelligence, blockchain technology and professional social networking play a pivotal role in the growth and expansion of a business. 
• Employee morale: Resources with rights tools can deliver more efficiently; hence equipping the team with the latest and greatest certainly adds more confidence and value. One can expect a colossal productivity difference when someone utilises new hardware instead of a five-year-old. 
• Security: As the enterprise moves global, there is a rise of of security concerns and evolving cyber threats. By investing in technology and security, businesses can minimise the risk. 

The forecast 

According to Gartner’s April 2022 report on Worldwide IT spending, “Worldwide IT spending is projected to total $4.4 trillion in 2022, an increase of 4% from 2021”. 

John-David Lovelock, distinguished research vice president at Gartner, said, “This year is proving to be one of the noisiest years on record for CIOs”. He also added, “Geopolitical disruption, inflation, currency fluctuations and supply chain challenges are among the many factors vying for their time and attention, yet contrary to what we saw at the start of 2020, CIOs are accelerating IT investments as they recognise the importance of flexibility and agility in responding to disruption.” 

John expects increasing of purchases and investment on analytics, cloud, security and seamless customer experiences.

While CIOs played a little conservative at the beginning of 2020, probably due to the pandemic and “how markets will fare” uncertainties. With the pandemic settling down, they are confident in IT investments amidst geopolitical churn and skyrocketing inflation.

The rise 

The Gartner data reveals that the two swiftest growing categories of technology spending in 2022 are:

• Software services to reach $675 billion, a 9.8% increase from 2021. The software includes enterprise applications and infrastructure software; and, 
• IT services to reach $1.27 billion, a 7% increase. IT services include Infrastructure-as-a-Service or Platform-as-a-Service offerings. 

Gartner expects the software service to reach double-figure growth in 2023, catapulted by digital business initiatives such as experiential end-consumer experience and optimisation of the supply chain.  

The impact of the Russia-Ukraine conflict 

Gartner does not expect the war to impact global IT spending directly. Although the research expects a shortage of talent and other delivery uncertainties, there won't be any slowdown in technology investments. 

While speaking about 2022 spending, Lovelock stated that “CIOs anticipate having the financial and organisational ability to invest in key technologies throughout this year and next.” He further noted that “Some IT spending was on hold in early 2022 due to the Omicron variant and subsequent waves but is expected to clear in the near-term. 

Gartner VP asserts that the CIOs with an eye for detail and focus on key market signals, such as buy to build IT, analog to digital conversion, and vendor partner negotiations for the proposed risks will fare much better. Only fragile businesses will resort to cost-cutting in 2022 and beyond. 

Legal industry on IT spending 

In February 2022, we discussed Gartner's Predictions on Legal Technology and found that the legal technology expenses increased 1.5 times to 3.9% of the total budget in 2020 from 2.6% in 2017. Gartner predicts legal technology spending will soar approximately 12% of in-house budgets by 2025, a threefold increase from 2020. 

“We have seen the IT spend of some law firms, particularly with regards to security, increase significantly over the past 2 years. This is largely due to the strict requirements of their corporate and institutional clients to ensure that their data is safe.” stated John Brimer, Account Director of the Ethan Group.

Zack Hutto, the Lead Advisor for Corporate Legal and Compliance Tech at Gartner, said, "Legal departments will increase spending on technology to reduce the dependency on outside counsel, address COVID-19, and satisfy a long-overdue need to modernise, digitise and automate legal work".

John Duckett, Director of InPlace Solutions commented, "Based on our annual survey data, Legal IT expenditure has been consistently at 4% of revenue in Australia for many years, but the majority of firms do report an increase in spending during the pandemic, and most expect this to continue, especially around security, risk mitigation, and compliance. The US and UK have historically had a higher spend, more like 5% of revenue."

Note: For additional information, readers may visit "IT Spend Forecast, 1Q22 Update" and read CIOs in 2022 in the complimentary Gartner ebook 2022 Leadership Vision for Chief Information Officers.

Also read top viewed Ai Legal article: The Role of AI in Legal Research.