Axe to fall on IT project spend amid coronavirus pandemic

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One of the immediate ways companies will mitigate the financial pressures of the spread of the coronavirus (COVID-19) will be to axe IT projects throughout the remainder of this year and into the next.

This is according to market research firm GlobalData, which says although there will be a long-term need for IT infrastructure, companies’ short-term focus will be on saving, not spending.

David Bicknell, principal analyst in the thematic research team at GlobalData, comments: “Despite a positive long-term picture for IT infrastructure spending, the immediate future looks bleak. Companies will aggressively cut costs throughout the remainder of 2020 and into 2021. IT projects will be axed and adoption of some technologies – such as edge computing and Internet of things – will be slower than expected.”

Since the outbreak of the coronavirus in Wuhan, China, in December 2019, over five million people have been infected globally, with deaths increasing to over 325 000 and recoveries nearing two million, at the time of publication.

In SA, the number of confirmed COVID-19 cases now stands at 17 200, recoveries at 7 960 and 312 people have succumbed to the disease.

Across the globe, organisations have not only had to refocus their operating models but also adopt new ways of doing business in response to the scourge of COVID-19. During this time, working from home has taken off.

GlobalData says the speed with which COVID-19 became a major international crisis took entire populations, governments and businesses by surprise, adding the enforced move to working from home immediately put IT infrastructure under significant pressure.

“Despite uncertainty over whether it could support remote working at scale, IT infrastructure coped well in the first stage of the crisis. However, with countries only coming out of lockdown in stages, there will be a long-term need for IT infrastructure to support changing business practices.”

Bicknell explains: “Although IT infrastructure has so far survived the COVID-19 test, customers and vendors should carry out a post-pandemic review to identify and correct any infrastructure failings. The risk is that, with all companies in survival mode, any necessary fixes will be forgotten until the next crisis comes along.

“Vendors may want customers to adhere to a lifecycle of planned retirements and upgrades but, in the aftermath of COVID-19, customers will cut costs and rely on what they have. Any vendors whose supply chains were overly reliant on China should take steps to minimise future disruption by adopting a multi-location approach.”

Similarly, Gartner forecasts global IT spending will decline by 8% in 2020 due to the impact of COVID-19.

According to the market analyst firm, worldwide IT spending is projected to total $3.4 trillion in 2020, which is an 8% decline compared to 2019.

The coronavirus pandemic and effects of the global economic recession are causing CIOs to prioritise spending on technology and services that are deemed “mission-critical” over initiatives aimed at growth or transformation, says Gartner.

“CIOs have moved into emergency cost optimisation which means investments will be minimised and prioritised on operations that keep the business running, which will be the top priority for most organisations through 2020,” says John-David Lovelock, distinguished research vice-president at Gartner.

“Recovery will not follow previous patterns as the forces behind this recession will create both supply side and demand side shocks as the public health, social and commercial restrictions begin to lessen.”

Gartner research indicates all segments will experience a decline in 2020, with devices and data centre systems experiencing the largest drops in spending.

However, as the COVID-19 pandemic continues to spur remote working, sub-segments such as public cloud services will be a bright spot in the forecast, growing 19% in 2020. Cloud-based telephony and messaging and cloud-based conferencing will also see high levels of spending growing 8.9% and 24.3%, respectively.

“In 2020, some longer-term cloud-based transformational projects may be put on hiatus, but the overall cloud spending levels Gartner was projecting for 2023 and 2024 will now be showing up as early as 2022,” concludes Lovelock.

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