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Covid-19 set to dent ICT spending this year

Peter Griffin, Contributor. 21 July 2020, 10:42 am
Covid-19 set to dent ICT spending this year

We heard from IT vendors early on during lockdown that the pandemic would see organisations across government and the private sector defer ICT projects and put off spending money.

Now we are seeing the first estimates of the impact that will have locally, with data and analytics group GlobalData expecting ICT spending in New Zealand to drop 6.3 per cent this year. That compares to initial estimated growth prior to Covid-19's arrival of 9.6 per cent growth for the year.

Enterprise ICT (information and communication technologies) spending this year is set to reach $14.4 billion (US$9.5 billion) across all categories including hardware, services and software and spans consumer and business ICT spending. 

Gopi Srikanth, Senior Technology Analyst at GlobalData, said the decline also reflects the disruption to supply chains that temporarily led to some IT products being difficult to source during the lockdown and in its immediate aftermath.

Buying decisions deferred

"Even for the few enterprises that are looking to maintain their pre-outbreak upgrade timelines, the COVID-19 outbreak has caused supply chain constraints that will affect the availability of hardware," he said.

The market for ICT services in New Zealand too will decline in 2020, as enterprises revisit their buying decisions owing to an increased focus on profitability amidst the uncertainty."

In May, analyst group IDC predicted 2020 global IT spending would drop 5.1 per cent this year as a result of Covid-19. 

Global Data's more pessimistic outlook is based on an analysis of its Market Opportunity Forecasts Model, a proprietary data set it maintains. As anticipated, the sectors most likely to defer ICT spending are the ones hit hardest by the impacts of Covid-19 - travel and leisure, transport and logistics and food service. 

The consumer goods category is also expected to see a 13.2 per cent decline in ICT spend in 2020 as job losses and pay cuts see consumers put off their purchase of new smartphones and computers, a trend that analysts have previously forecast.

Auckland Council is just one of many organisations that have flagged reduced ICT spending as it looks to cut costs across the board to deal with the pandemic fallout.

There are a few bright spots though.

Cloud and collaboration

"A few segments, however, including public cloud (comprising of SaaS, PaaS, and SaaS) will continue to grow as enterprises in New Zealand leverage public cloud to effectively manage their processes such as the recovery of data and safe backup systems," said Srikanth.

"Similarly, the market for enterprise social networking and collaboration platforms is set to increase by 22.5 per cent in 2020, owing to the demand for collaboration due to remote working requirements."

According to Global Data, the recovery will be driven by the digital transformation plans of organisations with demand for mobility software, smart chatbots, delivery apps and artificial intelligence set to grow in the forecast period out to 2024, which Srikanth said, "should provide a significant boost to the New Zealand ICT market."



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