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Global IT spending to accelerate in 2024

Global IT spending will continue to increase — and at a considerably faster pace — in 2024 as businesses loosen their purse strings amid expectations of a soft landing.

S&P Global Ratings expects IT spending to increase nearly 8% in 2024, significantly above 2023’s 4% rise and the rating agency’s nominal global GDP growth forecast of 6%. AI, cloud and PC upgrades are anticipated to be the top funding recipients as businesses continue their transition to the cloud and build up investment in nascent generative AI projects to boost sales, increase operational efficiency and improve competitiveness.

Over the next 12 to 24 months, investment in copilots, assistants and other AI capabilities is anticipated to climb. These will be essential in delivering more value to customers and helping providers capture more revenue. Edge AI products are anticipated to emerge over roughly the same period, as device manufacturers will want to drive a replacement cycle with higher average selling prices.

Cloud capital spending is expected to accelerate to nearly 30% this year, supported by the resumption of new workload migration and strong interest in AI offerings.

PC shipments are projected to increase 4% in 2024 as many businesses will need to refresh the installed base: PCs purchased during the early parts of the COVID-19 pandemic in 2020 will be about four years old or older this year, and support for Windows 10 will end in 2025. AI PCs may also be on the market by the second half of 2024, which would attract interest from early adopters.

Given these priorities, the semiconductor segment is expected to experience the greatest rebound in revenue among technology products — growing 14% in 2024, compared with a decline of 10% in 2023. External storage systems revenue is forecast to climb about 5% in 2024, following a decline of roughly 2% in 2023, according to an S&P Global Ratings analysis.

Meanwhile, the software segment and IT services should see revenue continue to grow. For the former, the increase is expected to exceed 10%, outpacing the overall IT industry, given that software is a key enabler of business automation and plays an important role in ensuring cybersecurity. IT services revenue is forecast to increase nearly 7%, partly due to growing public cloud infrastructure spending.

As businesses become more cognizant of their environmental responsibilities, the degree to which IT operations contribute to their overall environmental impact is a crucial consideration.

In S&P Global Market Intelligence 451 Research’s “Voice of the Enterprise: Digital Pulse, Sustainability 2023” survey, a “significant portion” of the surveyed businesses said they considered IT operations a major contributor to their environmental footprint, according to an S&P Global Market Intelligence report. Consequently, businesses’ sustainability objectives factor into the expectations and criteria they bring to their relationship with technology vendors and suppliers.

However, sustainability does not seem to be a big factor in technology decision-making. In one of the contributing third-quarter survey components of the S&P Global Market Intelligence Tech Demand Indicator, respondents rated external economic conditions, equipment costs, the pace of technology innovation and customer demand as the factors with greater than usual influence on technology spending. Environmental considerations were last on the list.

Sustainability is expected to significantly influence technology decision-making in the coming years, particularly as macroeconomic pressures ease. In S&P Global Market Intelligence 451 Research’s survey, more than 75% of surveyed businesses indicated that they expect to make moderate or major investments over the next several years to reach sustainability targets.

CT Bureau

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