Global IT spending on enterprise software to witness first drop in 10 years, to reach $426bn in 2020

Global IT spending on enterprise software to witness first drop in 10 years, to reach $426bn in 2020

As the Coronavirus pandemic continues to impact different sectors of the economy, spending on the enterprise software segment under the Information Technology (IT) industry is projected to take a plunge. Most sub-segments under the enterprise software umbrella will witness a decline in spending while essential ones might have an increase.

Data obtained by Buy Shares indicates that in 2020, the global spending will reach $426 billion, the first drop in ten years. Last year, the spending reached an all-time high of $458 billion, translating to a drop of about  6.98% when compared to the projected figures for 2020. Cumulatively between 2009 and the estimates of 2020, the spending on enterprise software will stand at $3.94 trillion. The lowest spending in the sector was in 2009 when the figure stood at $225.51 billion.

In 2018, the spending was $419 billion, an increase of 13.55% from 2017’s figure of $369 billion. Notably, this is among the most significant increases in spending over the last 10 years. Between 2014 and 2015, the spending remained stagnant at $310 billion before a slight increase to $316 billion in 2016. In general, the projected drop in spending for this year breaks an upward trajectory that began 10 years ago.

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US software publishing records all-time revenue in 2019

Buyshares.co.uk’s research also overviewed the estimated revenue of U.S. software publishers between 2005 and 2019. Our data show that 2019 recorded the highest revenue at $284.66 billion, a growth of 144.05% from 2005 when the amount stood at $116.64 billion. In total the estimated revenue during the period under review is $2.6 trillion. The revenue has been growing steadily but there was a slight drop in 2009 when the figure stood at $138.98 billion, a decline of about 2.62% from the previous year. The plunge can be attributed to the financial crisis. However, the revenue picked up in 2010 to hit 145.43 billion.

With the IT industry, the enterprise software segment is among the fastest-growing. The main aim of this segment is to meet arising needs for organizations like addressing efficiency. Under this segment, other sub-segments include business process management (BPM) software, enterprise resource planning (ERP) software, and customer relationship management (CRM) software which has been attracting interest in recent years. Other segments include devices and Data Center Systems.

Most of the sub-segments will experience a decline in 2020. However as people adapt to living with the Coronavirus, other sub-segments under enterprise software might grow. Working remotely, one of the measures to curb the virus spread is projected to spur the growth of public cloud services. Additionally, the cloud-based telephony and messaging and cloud-based conferencing will also see growth.

Businesses prioritizing on essential operations

The Coronavirus crisis has forced many sectors of the economy to prioritize important aspects of their operations, explaining the drop in enterprise software spending. Many businesses in the IT sector are keen on implementing measures that can keep their entities running during this pandemic. This strategy is replicated across the various business for 2020. However, some businesses unable to cope up have been closed. Just like other hard-hit sectors, recovery for the IT industry will be slow and many organizations need a strategy to move forward post Coronavirus pandemic.

On the other hand, the United States software publishing industry might experience a decline in revenue for 2020 as a result of the economic impact of the current pandemic.  It is projected that consumers and businesses will reduce demand for software, directly impacting profit margins.

Under the software publishing industries, there are companies that design, develop, and publish software. It is worth noting that the main players in this sector include firms like IBM Corporation, Oracle Corporation, SAP AG, and Microsoft Corporation which are competing to attain a competitive edge.

The recent surge in software publishing revenue has been a direct impact of businesses and consumers increasing their investment in software, computers, and video games. Furthermore, the increasing investments from the private sector have spurred demand from businesses, alongside a rise in disposable income which is pushing consumers to spend on software.  With emerging markets and new internet-based solutions fuelled by the popularity of mobile devices, there is a high consumption of mobile software.

With the recovery plan after the Covid-19 pandemic, the sector is expected to embark on a growth trajectory with a specific focus on mobile and cloud platforms, corporate profits. Furthermore, the sector will also see an increase in investments in information technology infrastructure.