Published on January 23, 2024, 6:20 am
Gartner, a renowned analyst firm, has released its 2024 worldwide IT spending forecast and it reveals some significant insights. According to Gartner’s projections, overall IT expenditures are expected to grow by 6.8% this year, reaching nearly $5 trillion. This growth rate more than doubles that of 2023 (3.3%), which Gartner attributes not to macroeconomic factors but rather to “change fatigue among CIOs.” This refers to the hesitance of IT leaders to sign new contracts or commit to long-term initiatives.
However, what CIOs should take note of in this year’s forecast is the rise of IT services as the number one spending segment for the first time ever. Gartner believes that this trend will continue into the future, with major implications for how CIOs operate. John-David Lovelock, distinguished VP analyst at Gartner, emphasizes that the ongoing rise of IT services highlights an evolution in the value proposition of internal IT and the role of the CIO.
Breaking down their projections further, Gartner anticipates an 8.7% increase in IT services spending by 2024, making it second only to software which is projected to grow at a rate of 12.7%. Gartner also expects a healthy 7.5% increase in data center systems spending, demonstrating a growing interest in on-premises strategies fueled in part by ongoing scrutiny of cloud costs and returns on cloud investments among IT leaders.
This shift towards increased reliance on IT services reflects a broader trend towards renting instead of buying technology solutions. One interesting aspect of this transition is the impact on talent within organizations. Lovelock notes that while internal IT talent spend typically increases by around 3%, salary growth expectations are closer to 6%. Consequently, organizations are spending more money each year on fewer employees.
This raises questions about where these talented professionals are going. According to Lovelock, IT services firms have successfully reduced their voluntary attrition rates post-pandemic, while CIOs have not fared as well. CIOs continue to lose employees to IT services firms and struggle with high vacancy rates and open positions. As a result, it appears that these talented individuals are increasingly choosing not to be on the enterprise payroll.
Gartner reports that spending growth rates for application implementation, managed services, and infrastructure implementation will outpace internal IT talent spending growth in 2024 and beyond across various industries. Furthermore, Gartner predicts substantial spending increases on consulting for IT work across most verticals.
Looking ahead, Gartner envisions a future where there will be more consultants than full-time staff members in every industry they track. This underscores the shift in the role of CIOs as they rely more heavily on IT services, consulting, and specialized talent to deliver business outcomes.
To succeed in this evolving landscape, CIOs must focus on developing strategic partnerships, establishing a business-critical agenda, and embracing change. The role of the modern CIO is shifting from being a one-stop shop for internal support to orchestrating a diverse range of services provided by different sources of talent.
As we move towards 2024 and beyond, these changes will become increasingly evident and critically important for organizations. CIOs who adapt quickly will be better positioned to navigate this new era of IT service dominance and drive successful digital transformations within their companies.