Latest report on IT spending includes optimistic and pessimistic predictions as well as how recovery will look different across industries.
IT spending plans for the second half of 2020 reflect the uncertainty about reopening economies and the next phase of the coronavirus pandemic, according to a new report from IDC.
Stephen Minton, a vice president of customer insights and analysis, explained the findings of the latest spending survey, “COVID-19: Factoring in the Impact on the Industry,” during a webinar on May 7 and predicted a 5% drop in overall IT spending for 2020.
“Pessimistic scenarios are much worse now than a month ago,” Minton said.
Minton said that IDC’s latest research suggested that tech spending will drop in Q2 but move back into positive growth by the end of 2020. Minton also said that recovery in Q3/Q4 remains an untested assumption.
“If we have to close down another time, that resets the board and we have to reforecast everything,” he said.
He added that analysts do not expect to see a vaccine in the short term but that the development of one will support the recovery in 2021. Minton predicted that this recession will follow the same overall pattern as previous downturns, but on a different scale.
“Generally, IT spending is a little less vulnerable than it was 10 years ago during the financial crisis,” Minton said. “Spending cuts are more on the device side this time and not so much infrastructure because more of that spend is in the cloud.”
Jessica Goepfert, a vice president for customer insights and analysis at IDC, also spoke during the webinar and described these four frameworks for recovery reflecting how the pandemic and the recovery will affect each sector differently:
Generally hums along: These industries have maintained operations, continue to hold up relatively well compared to others, and have curtailed tech spending only somewhat, including insurance, utilities, and public sector industries.
Bounce back: The companies have pulled back tech spending but are anxious to return to pre-coronavirus plans and budgets and should be able to get back up and on track more easily, including professional services.
Fits and starts: These industries are heavily dependent on the return of consumers to return to normal tech spending and will be slow to loosen the purse strings for critical investments, such as retail.
Slow crawl recovery: These companies have been the hardest hit by the shutdown, have implemented significant layoffs, and will have to restart basic operations before returning to pre-virus IT spending levels, such as transportation.
IDC predicts that telecom, media, and healthcare companies are relatively insulated by strong demand for services while consumer services, transportation, and many segments of retail and manufacturing will be hardest hit.
The IDC research also asked survey respondents to estimate how long the pandemic will last. The average estimate was 7.8 months with finance, government, manufacturing, transportation, communication, utilities, and media companies on the lower end of the estimate with education and retail sectors suggesting longer durations. Healthcare and life sciences companies gave a significantly higher estimate of 11.26 months or almost a year before the outbreak ends.
“What I have heard anecdotally is that some retailers, including food stores, are anticipating a second wave and are making investments to better prepare for that,” Goepfert said.
Minton described both optimistic and pessimistic scenarios about how the recovery could play out. The positive analysis looks like this:
- Stabilization in Q2
- Rapid economic recovery in Q3 and Q4
- Worldwide GDP shrinks by 1% overall
- US decline of 3%
- Supply chains recover quickly by end of Q2
The gloomy assessment is more likely if the coronavirus cases spike a second time and governments require a second lockdown:
- Lockdown and isolation measures continue beyond Q2
- Worldwide GDP goes down down 6%
- US GDP drops between 8 and 10%
- Slow and difficult recovery in second half of Q2
- China struggles to post growth of 1 – 2%; all other regions decline
The spending analysis showed that buyer intent has dropped from 1,065 in January to 983 in early May while market indicators went from 1,035 in January to 944 in May. A score above 100 indicates growth and below 1,000 suggests a decline in IT spending.
Minton said the demand for IT products and services is still strong and that this downturn is an external shock, not a tech-led recession like in 2001.
“The drivers for innovation are still there, and that’s why we expect overall IT spending to recover quickly when the overall economy recovers,” he said.
IDC’s Covid-19 Impact on IT Spending survey was conducted the week of April 22.
How to become a CIO: A cheat sheet (TechRepublic)
Office 365: A guide for tech and business leaders (free PDF) (TechRepublic download)
Accomplishment tracker (TechRepublic Premium)
ZDNet’s top enterprise CEOs of the 2010s (ZDNet)
6 ways to delete yourself from the internet (CNET)
Best to-do list apps for managing tasks on any platform (Download.com)
CXO: More must-read coverage (TechRepublic on Flipboard)
Source of Article