GenAI “Tax” Affecting Segments Such as Software
“Generative AI (GenAI) is being felt across all technology segments and subsegments, but not to everyone’s benefit,” said John-David Lovelock, Distinguished VP Analyst at Gartner. “Some software spending increases are attributable to GenAI, but to a software company, GenAI most closely resembles a tax. Revenue gains from the sale of GenAI add-ons or tokens flow back to their AI model provider partner.”
Data Center Systems Spending Booms Under GenAI
Spending on data center systems is expected to increase 24% in 2024, up from the previous quarter’s forecast of 10% growth. This is due in large part to increased planning for GenAI. (See Table 1).
“The compute power needs of GenAI are being felt across the data center, and spending in that segment reflects this ravenous demand,” said Lovelock.
Table 1. Worldwide IT Spending Forecast (Millions of U.S. Dollars)
| 2023 Spending | 2023 Growth (%) | 2024 Spending | 2024 Growth (%) | |
| Data Center Systems | 236,098 | 4.0 | 293,091 | 24.1 |
| Devices | 692,784 | -6.5 | 730,125 | 5.4 |
| Software | 974,089 | 11.5 | 1,096,913 | 12.6 |
| IT Services | 1,503,698 | 4.9 | 1,609,846 | 7.1 |
| Communications Services |
1,491,733 |
3.2 |
1,537,188 |
3.0 |
| Overall IT | 4,898,401 | 3.8 | 5,267,163 | 7.5 |
Source: Gartner (July 2024)
CIO Team Fatigue Lasting Longer Than Expected
IT services spending is now projected to grow 7.1% in 2024, down from 9.7% within the last forecast, due in part to slower spending across subsegments that include consulting and business process services.
“The change fatigue in CIOs that we saw at the start of the year has now abated and the contract backlogs going back to the third quarter of 2023 are being cleared. We expect to see a larger rush towards the end of the year to make up for the slow start,” said Lovelock.
Gartner’s IT spending forecast methodology relies heavily on rigorous analysis of the sales by over a thousand vendors across the entire range of IT products and services. Gartner uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data on which to base its forecast.
