Worldwide spending on information and communications technology (ICT) is forecast to reach $4.3 trillion in 2020, an increase of 3.6% over 2019, according to IDC.
Commercial and public sector spending on information technology (hardware, software and IT services), telecommunications services, and business services will account for nearly $2.7 trillion of the total in 2020 with consumer spending making up the remainder.
“The slow economy, weak business investment, and uncertain production expectations combined with protectionist policies and geopolitical tensions — including the US-China trade war, threats of US tariffs on EU automobiles and the EU’s expected response, and continued uncertainty around the Brexit deal — are still acting as inhibitors to ICT spending across regions,” said Serena Da Rold, program manager in IDC‘s Customer Insights and Analysis group.
“On the upside, our surveys indicate a strong focus on customer experience and on creating innovative products and services driving new ICT investments. Companies and organizations across industries are shifting gears in their digital transformation process, investing in cloud, mobility, the Internet of Things, artificial intelligence, robotics, and increasingly in DevOps and edge computing, to transform their business processes.”
Accelerating digital transformation
IT spending will make up more than half of all ICT spending in 2020, led by purchases of devices (mainly mobile phones and PCs) and enterprise applications.
However, when combined, the three IT services categories (managed services, project-oriented services, and support services) will deliver more than $750 billion in spending this year as organizations look to accelerate their digital transformation efforts.
The application development & deployment category will provide the strongest spending growth over the 2019-2023 forecast period with a five-year compound annual growth rates (CAGR) of 11.1%.
Telecommunications services will represent more than one third of all ICT spending in 2020. Mobile telecom services will be the largest category at more than $859 billion, followed by fixed telecom services. Both categories will see growth in the low single digits over the forecast period.
Business services, including key horizontal business process outsourcing and business consulting, will be about half the size of the IT services market in 2020 with solid growth (8.2% CAGR) expected for business consulting.
Consumer ICT spending slowing down
Consumer ICT spending will grow at a much slower rate (0.7% CAGR) resulting in a gradual loss of share over the five-year forecast period. Consumer spending will be dominated by purchases of mobile telecom services (data and voice) and devices (such as smartphones, notebooks, and tablets).
Four industries – banking, discrete manufacturing, professional services, and telecommunications – will deliver 40% of all commercial ICT spending in 2020. IT services will represent a significant portion of the spending in all four industries, ranging from 50% in banking to 26% in professional services.
From there, investment priorities will vary as banking and discrete manufacturing focus on applications while telecommunications and professional services invest in infrastructure. The industries that will deliver the fastest ICT spending growth over the five-year forecast are professional services (7.2% CAGR) and media (6.6% CAGR).
Spending by business size
More than half of all commercial ICT spending in 2020 will come from very large businesses (more than 1,000 employees), while small businesses (10-99 employees) and medium businesses (100-499 employees) will account for nearly 28%.
IT services will represent a significant portion of the overall spending for both market segments – 54% for very large businesses and 35% for small and medium businesses. Application and infrastructure spending will be about equal for very large businesses while small and medium businesses will invest more in applications.
“SMBs are increasingly embracing digital transformation to take advantage of both the opportunities it presents, and the disruption it can mitigate,” said Shari Lava, research director, Small and Medium Business Markets.
“Digitally determined SMBs, defined as those that are making investments in digital transformation related technology, are almost twice as likely to report double-digit revenue growth versus their technology indifferent peers.”