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GenAI hype will not impact growth of IT spending

While generative AI (GenAI) had significant hype in 2023, it will not significantly change the growth of IT spending in the near-term, market research firm Gartner says downsizing its forecast for worldwide IT spending in 2024. The company is cutting the expected growth from 8% to 6.8%. Worldwide IT spending 2024 is expected to reach a total of $5 trillion in 2024. 

“While GenAI will change everything, it won’t impact IT spending significantly, similar to IoT (Internet of Things), blockchain and other big trends we have experienced,” says John-David Lovelock, vice president at Gartner. 

“2024 will be the year when organizations actually invest in planning for how to use GenAI, however IT spending will be driven by more traditional forces, such as profitability, labor, and dragged down by a continued wave of change fatigue.”

The forecast says IT services will continue to see an increase in growth in 2024, becoming the largest segment of IT spending for the first time. Spending on IT services is expected to grow 8.7% in 2024, reaching $1.5 trillion. 

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“This is largely due to enterprises investing in organisational efficiency and optimisation projects. These investments will be crucial during this period of economic uncertainty.”

“Adoption rates among consumers for devices and communications services plateaued over a decade ago. Consumer spending levels are primarily driven by price changes and replacement cycles, leaving room for only incremental growths, so being surpassed by software and services was inevitable,” said Lovelock. 

“Enterprises continue to find more uses for technology – IT has moved out of the back office, through the front office and is now revenue producing, until there is a plateau for how and where technology can be used in an enterprise, there cannot be a plateau in enterprise IT spending.”The overall IT spending growth rate for 2023 was 3.3%, only a 0.3% increase from 2022. This was largely due to change fatigue. Momentum will regain in 2024, with overall IT spending increasing 6.8%, according to the forecast.

“Even with the expected regained momentum in 2024, the broader IT spending environment remains slightly constrained by change fatigue. Change fatigue could manifest as change resistance — with CIOs hesitating to sign new contracts, commit to long-term initiatives or take on new technology partners. For the new initiatives that do get launched, CIOs require higher levels of risk mitigation and greater certainty of outcomes.”

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