Indian IT spending to reach $110.3 bn in 2023 amid global slowdown: Gartner

Information technology (IT) spending by Indian businesses is estimated to grow 0.5% this year, totaling $110.3 billion, up from $109.7 billion in 2022, according to a report published on Wednesday by IT analyst firm Gartner. 

The report also said that software and IT services will drive worldwide IT spending to $4.5 trillion in 2023, an increase of 2.4% above 2022, according to the latest forecast by market research firm Gartner. That’s down from last quarter’s estimate of 5.1% growth, mainly due to a slower-than-expected rebound for hardware sales.  

Even for IT spending by Indian firms, Gartner has lowered the growth forecast from an earlier report published on November 14, 2022, that predicted that Indian IT spending will grow from $109 billion in 2022 to $112 billion in 2023, up by 2.6%. The forecast has been lowered mainly due to the impact of inflation on consumer spending power as well as the ongoing layoffs that tech companies are currently experiencing.  

“Consumers and enterprises are facing very different economic realities,” said John-David Lovelock, Distinguished VP Analyst at Gartner. “While inflation is devastating consumer markets, contributing to layoffs at B2C companies, enterprises continue to increase spending on digital business initiatives despite the world economic slowdown.  

“A turbulent economy has changed the context of business decisions and can cause CIOs to become more hesitant, delay decisions or reorder priorities. We’ve seen this in action with the reshuffling taking place among some B2B companies, especially those that overinvested in growth. However, IT budgets are not driving these shifts, and IT spending remains recession-proof,” he said. 

The software and IT services segments are projected to grow 9.3% and 5.5% in 2023, respectively. The devices segment is forecast to decline 5.1% this year as both consumers and enterprises lengthen device refresh cycles. In India too, only software shows a positive growth of 12.8% in 2023, up from 11.9% in 2022. The IT services spending will largely remain flat at 6.7%, a moderate decline from 6.1% last year, said Gartner.  

“During the height of the pandemic, employees and consumers had technology refreshes of tablets, laptops and mobile phones due to remote work and education,” said Lovelock. “Without a compelling reason for an upgrade, device assets are being used longer and the market is suffering.”  

The Gartner report further noted that job vacancy rates have been increasing every quarter and the open jobs per unemployed rate is at record lows in many countries. High competition for talent is challenging chief information officers (CIOs) to hire skilled IT staff, limiting growth for companies who struggle to scale without the requisite talent.  

Simultaneously as software spend continues to rise, the IT services market is growing as companies look to bring in outside IT staff for implementation and support. For example, spending on consulting is expected to reach $264.9 billion in 2023, a 6.7% increase from 2022.  

“CIOs are losing the competition for talent,” said Lovelock. “IT services spending is growing more quickly than internal services in every industry. Skilled IT workers are migrating away from the enterprise CIO towards technology and service providers (TSPs) who can keep up with increased wage requirements, development opportunities and career prospects.”  

Gartner said that while inflation continues to erode consumer purchasing power and drive device spending down, overall enterprise IT spending is expected to remain strong, backed by digital spending by businesses.  

Another report by research firm IDC published on December 6, 2022 also said that more than 95% of Indian organisations plan to increase spending on digital transformation (DX) or keep at the same level in 2023. The DX spending in India is likely to reach $85 billion by 2026 as firms aim to reduce the costs by increasing efficiency, improve security and risk capabilities, as well as customer experience via tech-enabled digital transformation in the long term, it said,