Gartner IT Spending Forecast to 2024: With IT services poised to take on the lion's share of IT spending, it's time for CIOs to recognize that their value proposition is undergoing a significant transformation.
Analyst firm Gartner has released its global IT spending forecast for 2024, and the result is surprising: overall IT spending is expected to grow by 6.8% this year, to less than US$5 trillion.
That growth more than doubles what the company considers its 2023 growth rate (3.31TP3Q), stagnation that Gartner attributes not to macroeconomic forces but largely to what it calls “change fatigue among CIOs” – that is, IT leaders' hesitancy to sign new contracts or commit to long-term initiatives.
But the story CIOs should watch for in this year's spending forecast isn't about volume or overall growth, or even whether generative AI is behind this year's encouraging numbers (it isn't). It's about how the IT services category is growing to become the No. 1 spending segment for the first time, a top spot that Gartner believes it won't relinquish in the near future, with major consequences for the way CIOs work .
And this is because the continued growth of IT services, according to John-David Lovelock, vice president analyst at Gartner, reveals an evolution in the value proposition of internal IT and the role of the CIO that may not yet be evident to CIOs who believe that the past is the prologue to solving their current problems, particularly with regard to personnel.
Rent vs. purchase
Analyzing its projections, Gartner predicts that spending on IT services will increase by 8.7% in 2024, second only to software, with 12.7%, another category for which the company sees no future plateau. Gartner predicts that software will overtake the nearly stagnant communications services sector to take second place in IT spending by 2028.
The company also expects a healthy 7.5% increase in spending on IT systems. data center, demonstrating an increase in on-premises strategies, driven in part by continued scrutiny of cloud costs and return on cloud investments among IT leaders. This has also proven to be a contributing factor to what Gartner’s Lovelock calls “the cloud slowdown,” referring to reduced growth rates in cloud spending, which is still expected to grow by a robust 19% in 2024.
But the evolution in spending on IT services, with IaaS and business process services growing faster and support for data centers and customer devices declining, underscores a continued shift in favor of renting what you might otherwise buy.
An interesting part of this rent-versus-buy story is the talent equation. According to Lovelock, the average increase across industries in spending on in-house IT talent is about 3%. And with salary growth expectations approaching 6%, the only conclusion Lovelock can draw is: “Overall, CIOs are spending more money every year on fewer employees. They did it last year; we are projecting they will do so this year; in fact, we are projecting basically the same graph for the next five years,” he said in a webinar on the forecast results.
This talent drain resulting from companies' IT payrolls raises the question: where are these IT professionals going?
Lovelock believes he has the answer: Although IT services companies have seen post-pandemic voluntary attrition rates (“The Great Resignation”) below the long-term average of 18%, according to Gartner research, CIOs are not They came out so well.
“CIOs have not seen this reduction in attrition rate. They are still losing employees to IT services companies. They still have more positions open than they would like,” Lovelock said. “In fact, part of the slowdown we saw in 2023 was about: where will the team be that will do all this work?”
Outsourcing is back
Increasingly, the answer appears to be that these people won't be on the company's payroll, says Lovelock.
Across nearly every industry, Gartner reports that growth rates in CIO spending on application and managed services implementation and on infrastructure and managed services implementation will eclipse growth in spending on internal IT talent (the 3% mentioned above) in 2024 and beyond.
“There is an ongoing shift in work moving from CIOs to IT services companies,” Lovelock said, and with managed services providers increasingly taking on commoditized roles, Gartner doesn’t see the discrepancies in these rates of growth changes anytime soon. especially with nearly 60% of IT professionals employed by CIOs actively looking for another role, according to the company.
But even the bumps in reliance on managed services pale in comparison to the expected spending increases for consultants, according to Gartner, which predicts 10% to 15% growth in consulting spending for IT work across nearly every vertical.
And with the same graph projected for the next five years, what will the final result be over time? “More consultants than people in every industry we monitor,” Lovelock said.
This is where many of the needs for highly specialized but hard-to-hire talent are likely to be met by most CIOs, underscoring a role shift already underway for many IT chiefs today.
The Rise of Generative AI and the Future of IT Spending
While generative AI will not be the main driver of global spending in 2024, it represents a crucial inflection point. Businesses are increasingly exploring the potential of AI to streamline operations, drive innovation and improve customer experience. This is reflected in IT spending, which Gartner says is expected to continue to grow in the coming years.
According to Gartner, global IT spending is expected to grow significantly, representing a substantial increase over previous years. This growth is driven by the need for companies to adapt to digital transformation and remain competitive in a constantly evolving market.
The IT services spend segment is becoming increasingly dominant, reflecting the trend toward outsourcing and the search for external expertise. This shift requires CIOs to rethink their strategies and focus on service orchestration and strategic partnerships.
Short-Term Challenges and Opportunities
Despite the optimistic outlook, CIOs face significant challenges in the short term. CIOs’ resistance to change and difficulty attracting and retaining talent are obstacles that must be overcome. In addition, the increasing complexity of the technology landscape requires a more strategic and collaborative approach.
However, these challenges also represent opportunities for CIOs who are willing to embrace change and innovate. Those who can build strong partnerships, invest in new technologies, and develop a culture of continuous learning will be well-positioned to lead their companies’ digital transformation.
The Future of IT: A Vision from John-David Lovelock
As John-David Lovelock noted, the evolution of the CIO role is inevitable. The growing reliance on IT services and consulting requires IT leaders to become strategic orchestrators, able to bring together different talent pools and drive innovation.
“This evolution in what CIOs do, in the value proposition they bring to the enterprise, is evident in the long term. But it’s not yet as evident to CIOs themselves,” Lovelock said.
In short, the future of IT will be shaped by collaboration, innovation, and adaptation. CIOs who are willing to embrace change and build strategic partnerships will be well positioned to lead their companies’ digital transformation and drive long-term success.
Orchestration at the top
“This evolution in what CIOs do, in the value proposition they bring to the company, is evident in the long term. But it’s still not as evident to CIOs themselves,” said Lovelock. He sees CIOs still thinking that they are riding the same talent waves of the past, facing a temporary problem that they will solve: that their staff will return, that hiring will resume, that attrition rates will decrease, and that they will be able to attract the skills they need at affordable prices.
“It doesn’t look like they’ll be able to do that. There are a lot of things that IT staff with these critical capabilities and skills are looking for that are outside of the CIO's control,” he said.
With the increasing reliance on IT and consulting services to deliver results ranging from commoditized customer support to differentiated generative AI, The role of the CIO may soon become less about a one-stop shop for business support, overseeing internally developed projects and products, and more about bringing together a myriad of services performed by an increasingly heterogeneous mix of talent sources, predominantly outside the direct reach of the CIO.
Such change will continue to favor CIOs who are astute in developing strategic partnerships, establishing a business-critical agenda, and not shying away from the challenge of change. In short, the orchestrators in chief.
“This shift is something that will start to be much more evident in 2024 and will become critical in 2025,” Lovelock said.
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Translated by 4Matt Technology, from the original CIO: IT services spending signals major role change for CIOs ahead