Recently IDC predicted that IT spending will drop by 5% due to the COVID-19 pandemic.[1] Last week, Gartner went further by predicting that IT spending would drop by 8% or $300 Billion.[2] (Expect a prediction bidding war.) Both were consistent: highest hit areas would be devices, followed by IT service and enterprise software.
The predicted $100 billion drop, in those last two categories, should send chills through those of us who make our living in those two categories. And keep in
mind, this drop will occur in the latter half of this year. To date, here have been very few cuts.
But I’m seeing the glass half full here. Half full of lemonade.[3]
Here is my thought process:
- For at least five years, we have been advocating to abandon the senseless implementation of application after application. (You know: the silo making industry.) We have made a strong case for avoiding the application centric quagmire in Software Wasteland.[4]
- And yet spending on implementing application systems had continued unabated since 2015.
- With the need to slash budgets in the latter half of 2020, the large application implementation projects will be the easiest section to target.
- Indeed, the IDC article says that “IT services spending will also decline, mostly due to delays in large projects.”
- Furthermore, “some firms will cut capital spending and others will either delay new projects or seek to cut costs in other ways.”
- Gartner reported that “some companies are cutting big IT projects altogether; others are ploughing ahead but delaying some elements of their plans to save money.”
- Hershey has halted sections of a new ERP system and will drop IT capital spending from the budgeted $500 million to between $400-450 million.
- Gartner also stated that “health care systems [are] pushing out projects to create digital health records by six months or more.”
This would be a terrible time to be an application software vendor or a systems integrator. The yearly 7% reductions in both categories are still in front of us. Any contract not yet signed will be put on hold. Even contracts in progress may get cancelled.
