Analysts cut tech spending forecast for 2023 as consumers hold back TechCrunch
Forecasting expenses is a delicate task, especially in times of economic uncertainty. Perhaps that’s why IDC and Gartner have cut their new year slump forecasts, with Gartner now predicting modest growth of 2.2% for 2023, with IDC being a little more optimistic at 4.4%.
In the fall, Gartner predicted a much more robust 5.1% and IDC was looking at between 5% and 6%. Both companies look at a combination of business and consumer spending in their numbers.
Gartner says it’s the consumer side of the ledger that has become a drag on their forecast, as the company expects enterprise buyers to increase spending in the coming year.
“As inflation devastates consumer markets, contributing to layoffs at B2C companies, companies continue to increase spending on digital business initiatives despite the global economic slowdown,” said Gartner analyst John-David. Lovelock in a statement.
When we spoke to IDC analyst Rick Villars for an article on 2023 spending, he left some wiggle room in his prediction:
“Spending on basic IT infrastructure, enterprise software, professional services to implement and operate systems – even if the economy remains stable, we expect continued healthy growth in the 5% range at 6% in total for these spaces. It would take a more severe economic downturn than what we’re seeing for that to change,” Villars told TechCrunch.
Perhaps squeezing consumer spending is the source of the problem, although Adobe’s Digital Price Index found prices for electronics, which include items like phones and PCs, fell. more than 12% for the year (with prices rising 1.9% in December). But that was more than offset by groceries, which were up 13.5% year over year, a number more likely to have a much bigger impact on consumers in general.
Gasoline prices (which Adobe doesn’t measure) fell 2% in December (according to CNBC), but heating oil rose 41%. At the end of the day, consumers probably don’t feel confident right now when it comes to buying new technology if the basics cost them significantly more than they did a year ago.
The numbers confirm this, with PC sales down for the fourth straight quarter. That translated into a 28% drop for the fourth quarter of 2022, numbers so low that Gartner said it was the biggest one-quarter drop since the company tracked that data amid of the 1990s.
Phone sales were also dismal, with sales being the weakest in a decade. The numbers were down 17% in the fourth quarter of 2022, down 11% for the year.
While consumers are clearly cutting spending, businesses are less likely to cut spending as technology can help soften the impact of an economic downturn, which Villars told us in the December article on IT spending :
“The main thing we hear from CIOs is that technology is part of solving the business challenges that a recession brings. And if the focus is only on reducing technology investments, they don’t actually help the business through the recession or these disruptions.
Certainly, companies will not reduce cybersecurity as the new data from Canalys shows. The company predicts that security spending will increase by 13% in 2023.
Consumers will likely continue to think twice about buying electronics in the first half of the year if food and fuel prices don’t come down, and that will have a big impact on overall numbers, but As these companies predict, business spending continues to look a lot brighter as businesses see technology as a critical budget item.
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