Report: Despite looser COVID-19 policies, IT spending will be down this year

Business confidence in IT spending declines despite moves to ease economic lockdowns, according to IDC. (Pixabay)

While most of the shelter-at-home and quarantine policies due to the COVID-19 pandemic have loosened, IT spending will be down this year.

While most of the stay-at-home and quarantine policies due to the COVID-19 pandemic have loosened, IT spending will be down this year, IT spending will be down this year, according to IDC.

As of the end of May, IT buyers in the U.S, Western Europe, and some parts of Asia/Pacific indicated that they now expect total IT spending to decline by more than previously anticipated, according to IDC's COVID-19 Tech Index.

IDC said that confidence levels were particularly low in the U.S., as they have continued to trend down since the coronavirus pandemic began. U.S. firms are slightly more confident about the overall economy than they were two weeks ago, but are less confident about their own IT budgets this year as a whole.

IDC predicted significant spending declines for traditional technologies including PCs, peripherals, software applications, and project-oriented IT services. Survey results also deteriorated in Europe, especially in France, Italy, and Russia.

"The survey results have diverged with businesses in most countries now expressing less confidence about their own spending than about the broader economy," said Stephen Minton, vice president with IDC's Customer Insights & Analysis group, in a statement. "This could just reflect the fact that we’re still in the middle of the second quarter when the biggest spending cuts are likely to be concentrated and the scale of the short-term impact has been even worse than some firms expected.

"In fact, survey results are now closer in line with market indicators in terms of the scale of IT spending decline projected for 2020 as a whole."

RELATED: Coronavirus flushes IT spending to a 2.7% decline: IDC

In early April, International Data Corporation (IDC) said worldwide IT spending was expected to decline by 2.7% after previously projecting in March that it would grow by 1% by the end of 2020. Prior to the coronavirus pandemic, IDC forecast growth of more than 4% in January. IDC didn't say if it had revised IT spending being down by more than 2.7% going forward.

Business confidence is on the rise in Asia/Pacific, but the picture is more complex, according to IDC's latest poll. IT spending is still projected to increase in China, where the economy has moved more quickly from a containment to recovery mode, but confidence levels plunged in India and even declined in Korea where moves to ease lockdown measures appeared to trigger some instances of infections increasing again.

"The recovery phase in the second half of the year will be unpredictable and there may be volatility in survey results as businesses react to anxiety around a possible second wave of infections," said Minton. "The first phase of this crisis was uniformly bad for everyone, but the next chapter will be very localized and dependent on a delicate balance of medical and economic factors.

"Not surprisingly, the latest survey results support a sense that IT buyers remain cautious in this type of economic climate and continue to be vigilant in the near term. Moreover, we have now entered a phase where some companies are being forced into bankruptcy or employee reductions, which will have inevitable implications for tech spending in the second half of the year."

IDC said its COVID-19 Tech Index uses a scale of 1,000 to provide a directional indicator of changes in the outlook for IT spending and is updated every two weeks. The index is based partly on a global survey of enterprise IT buyers, and partly on a composite of market indicators which are calibrated with country-level analyst inputs relating to medical infection rates, social distancing, travel restrictions, public life, and government stimulus.

A score above 1,000 indicates that IT spending is expected to increase, while a score below 1,000 points towards a likely decline.