Gartner Expects Global IT Spends To Dip In 2020 Amid Coronavirus Pandemic
Gartner Inc. expects global tech spending to tumble this year as the new coronavirus pandemic froze economic activities.
Worldwide IT spending is expected to decline 8 percent over last year to $3.4 trillion in 2020, the technology research and advisory firm said in a media statement. In 2019, demand for overall global IT spending grew 1 percent at $3.7 trillion.
“The coronavirus pandemic and effects of the global economic recession are causing chief investing officers to prioritise spending on technology and services that are deemed ‘mission-critical’ over initiatives aimed at growth or transformation,” John-David Lovelock, vice-president at Gartner, said in the statement.
Business leaders have moved into emergency cost optimisation, resulting in “minimised and prioritised operations that keep businesses running”, Lovelock said. “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.”
Most major Indian IT companies, including Infosys Ltd., HCL Technologies Ltd. and Wipro Ltd., have also temporarily suspended their guidance for the financial year ending March 2021 because of disruptions caused by the virus outbreak. Tata Consultancy Services Ltd., India’s largest software services provider, expects its revenue to contract in the ongoing fiscal.
Infosys CEO Salil Parekh, in a post-earnings press conference, said there would be pressure in client discretionary spending in the near term. The IT companies even acknowledged that some of their clients have requested for an extension in payment timelines as well as discount in pricing.
“IT spending recovery will be slow through 2020, with the hardest-hit industries, such as entertainment, air transport and heavy industry, taking over three years to come back to 2019 IT spending levels,” Lovelock said. “Recovery requires change in mindset for most organisations. There’s no bouncing back. There needs to be a reset focused on moving forward.”
The Nifty IT Index dropped as much as 3 percent at 2 p.m. on Thursday, becoming the worst sectoral performer. The gauge was dragged by heavyweights Infosys and Tech Mahindra that are down 4.8 percent and 4.5 percent, respectively. These two, along with NIIT Technologies that’s down 3.6 percent, are top three losers on Nifty IT Index.