Gartner forecasts European IT spending to rise next year, with software and IT services segments to see the most growth
European IT spending to be in good health for the following year, despite the economic and geopolitical upheaval currently gripping the world.
This is according to analyst house Gartner, which in its quarterly IT spending forecast that IT spending in Europe is projected to total $1.1 trillion in 2024, an increase of 9.3 percent from 2023.
Gartner also said that IT spending in Europe is on pace to surpass $1 trillion by the end of 2023. It comes after the firm last month predicted that worldwide IT spending will total $5.1 trillion in 2024, an increase of 8 percent from 2023.
European IT spending
“Despite a conflated economic situation, IT spending in Europe continues to be recession-proof,” said John-David Lovelock, distinguished VP analyst at Gartner.
“CIOs in Europe who pursued the “growth at all costs” strategy for over a decade, are now shifting the emphasis of ongoing IT projects toward cost control, efficiencies and automation, while curtailing IT initiatives with longer ROIs,” said Lovelock.
According to Gartner, although artificial intelligence (AI) is a priority for CIOs this year and next, it is not yet a spending priority. There are other factors such as revenue generation, profitability and security fuelling IT spending in Europe next year.
“Maintaining a healthy profit margin has become pivotal for European corporations and this has ushered in a new wave of pragmatism,” said Lovelock.
Spending breakdown
Gartner also made predictions into which IT segments will benefit from the spending increase in Europe.
It said that software and IT services are the two segments where CIOs in Europe are expected to increase their spending the most in 2024.
It said that while there is sufficient spending within data centre markets to maintain the existing on-premises data centres, new spending continues to skew toward cloud options (including infrastructure as a service [IaaS]), which is expected to grow 27 percent in Europe in 2024.
According to Gartner, CIOs in Europe are also shifting their priorities internally, including enhancing cybersecurity spending in the cloud and planning for AI and generative AI (GenAI).
“AI has also added a new level of concern around security ensuring that their systems are wrapped before hackers get near their sensitive data,” said Lovelock.
John-David Lovelock, distinguished VP analyst at Gartner. Image credit Gartner
Gartner forecasts spending on security and risk management in Europe to reach an estimated $56 billion in 2024, a 16 percent increase from 2023.
Gartner detailed its IT spending breakdown on segmented basis, as follows.
Data centre system spending will rise 8 percent in 2024, compared with 3.1 percent in 2023.
Spending on devices will rise 4.6 percent in 2024, after declining 14.3 percent in 2023.
Spending on the software segment will increase 14.5 percent in 2024, after a rise of 14.6 percent in 2023.
IT services spending in 2024 will increase 11.8 percent from a 10 percent increase in 2023.
And communication services spending will rise 4.4 percent in 2024, after a 4.6 percent rise in 2023.
Skills shortage
And Gartner pointed out that some of the growth in IT services is due to talent shortages in IT departments in Europe.
“There is a migration of IT skills away from the enterprise IT department toward technology and service providers (TSPs),” said Lovelock. “CIOs do not have the employees nor the talents to do all the work required and turn to IT services firms to fill in the gaps.”
But the current geopolitical and economic issues around the world will likely have an impact.
Gartner said that inflation continues to impact consumer purchasing power, and while businesses and consumers are expected to increase their spending on devices in 2024, the level of IT spending on devices is not estimated to go back to 2021 levels until 2027.
Cloud differentiator
In Europe, Austria, Ireland and Finland are projected to record the biggest bounce back in consumer spending in 2024.
But the top three most mature countries in Europe will represent 51 percent of total IT spending in Europe in 2024. According to Gartner, IT spending in the UK, Germany and France is projected to total $588 billion in 2024, up 9.8 percent from 2023.
Among the international monetary fund (IMF) developing countries (Hungary and Poland), IT spending is estimated to total $32.3 billion in 2024, up 9.2 percent from 2023.
Investment in cloud is a key differentiator between mature and developing countries, said Gartner. Not all cloud application, platforms and services are offered in emerging countries which impairs adoption.
“The lack of cloud specific skills available to deploy, maintain and run cloud is a significant barrier in developing countries Mature countries are large enough to attract cloud providers and IT talent,” said Lovelock.
