Software spend key focus for local businesses

Published on the 20/01/2020 | Written by Heather Wright

Gartner forcasts business spend

What Gartner’s latest spending forecast says about the changing face of business IT…

When it comes to IT spend for the year ahead, it’s all about the software for Australian and New Zealand companies.

The latest Gartner Quarterly Spending Forecast shows spending intentions firmly focused around software which is forecast to see 12.0 percent growth in Australia to hit AU$18 billion, with 12.1 percent growth in New Zealand taking it to NZ$2.4 billion.

Those figures see software accounting for 17 percent of NZ IT spend and 18.9 percent of Australian spend, and highlight companies increasing view of code as a core differentiator in a digital first world. The increase comes too, as support for Windows 7 ends along with support for several Microsoft server operating systems and businesses continue to adopt cloud.

Maturing cloud environments is an example of how this dilemma is alleviated.

“Almost all of the market segments with enterprise software are being driven by the adoption of software-as-a-service,” Gartner research vice president John-David Lovelock says. “We even expect spending on forms of software that are not cloud to continue to grow, albeit at a slower rate.”

Lovelock says while SaaS is gaining more of the new spending, licensed-based software will still be purchased, and its use expanded through 2023.

“Last quarter we introduced the ‘and’ dilemma, where enterprises are challenged with cutting costs and investing for growth simultaneously. Maturing cloud environments is an example of how this dilemma is alleviated: Organisations can expect a greater return on their cloud investment through cost savings, improved agility and innovation and better security,” Lovelock says.

It’s a spending trend he says isn’t going away anytime soon.

The latest figures are an increase on Gartner’s earlier forecasts for the year, which had predicted a 4.6 percent increase to nearly $98 billion for Australia and a 3.6 percent increase to $13.9 billion for New Zealand.

Those figures have now been revised upwards, with New Zealand’s spend now forecast to climb 5.5 percent to hit NZ$14.3 billion and Australia forecast to clock 5.7 percent growth to AU$99.6 billion.

The Kiwi and Australian figures suggest businesses here are more bullish in their spending plans that than our global counterparts, with global spending expected to increase just 3.4 percent to US$3.9 trillion. That global spend is up from the earlier forecast of $3.7 trillion as businesses globally revisit IT spend as economic and political uncertainty eases.

Looking further out, Gartner is forecasting Aussie spend to cross the $100 billion mark in 2021, at $103.2 billion, with NZ inching closer to the $15 billion mark.

But while software spend is looking buoyant locally, other markets are tapering off. New Zealand will record negative growth in devices, down 2.1 percent to $1.8 billion – the only decline forecast across the A/NZ markets. Australian device spend will be up a meagre 2.3 percent to $13.1 billion. Data centre system spend too is subdued at 2.3 percent (to $3.1 billion) for Australia, and just 1.0 percent, to $406 million for New Zealand.

Services spend for both countries is looking more robust with IT services (Australia’s biggest category at $36 billion) forecast to increase around 4.8 percent for both countries, while communications services – a weak category globally with just 1.5 percent increase forecast after a -1.1 percent decline last year – is even stronger at 5.0 percent in Australia and 6.2 percent for New Zealand, where it continues to hold sway as the biggest category with $5.4 billion in spend.

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