Based on the research by Gartner, it appears that generative AI has not yet significantly impacted IT spending levels. The focus of IT spending is currently on technologies that enable automation and efficiency to drive growth at scale with fewer employees, and generative AI is not a major contributor to this spending trend.
Worldwide IT spending is projected to reach a total of total £3.7 trillion in 2023, an increase of 4.3% from 2022, according to the latest forecast by Gartner. As CIOs continue to lose the competition for IT talent, they are shifting spending to technologies that enable automation and efficiency to drive growth at scale with fewer employees.
“Digital business transformations are beginning to morph,” said John-David Lovelock, VP analyst at Gartner. “IT projects are shifting from a focus on external facing deliverables such as revenue and customer experience, to more inward facing efforts focused on optimization.”
The software segment will see double-digit growth in 2023 as organisations increase utilisation and reallocate spending to core applications and platforms that support efficiency gains, such as enterprise resource planning (ERP) and customer relationship management (CRM) applications. Vendor price increases will also continue to bolster software spending through this year.
While the overall outlook for enterprise IT spending is positive, device spending will decline 8.6% in 2023 due to the ongoing impact of inflation on consumer purchasing power.
“The devices segment is experiencing one of its worst growth years on record,” said Lovelock. “Even as inflation eases slightly in some regions, macroeconomic factors are still negatively impacting discretionary spending and lengthening device refresh cycles. Device spending is not expected to recover to 2021 levels until at least 2026.”
“Generative AI’s best channel to market is through the software, hardware and services that organizations are already using,” said Lovelock. “Every year, new features are added to tech products and services as add-ons or upgrades. Most enterprises will incorporate generative AI in a slow and controlled manner through upgrades to tools that are already built into IT budgets.”
“When it comes to AI this year, organizations can thrive without having AI in production but they cannot be without a story and a strategy,” added Lovelock.
While generative AI is a topic of interest and curiosity for many business and IT leaders, its impact on IT spending levels is not yet substantial. The current focus of IT spending is on areas like automation, efficiency, and core software applications, which are considered more immediate and tangible drivers of growth and productivity.
Generative AI, on the other hand, may still be in its early stages of adoption for many organizations. It is a technology that holds promise and potential for various applications, but its incorporation into enterprise operations and workflows may require careful planning, evaluation, and integration with existing systems.
As Gartner's research indicates, generative AI is expected to be integrated into enterprises gradually through existing spending channels. This approach allows organizations to incorporate generative AI functionalities into their existing tools and technologies, minimizing the need for significant additional investment. It also allows them to explore and test the potential benefits of generative AI within the context of their current IT budgets and strategic plans.
While the long-term prospects for generative AI remain promising, its widespread adoption and significant impact on IT spending may take time to materialize. As the technology matures, and businesses gain a deeper understanding of its potential value, we may see a greater shift in IT spending towards generative AI solutions in the future. For now, the focus appears to be on immediate priorities like automation and efficiency, while keeping a close eye on the evolving landscape of generative AI.