With COVID-19, IT spending to decline by 2.7%, IDC says

COVID-19 is driving down overall IT spending, and now analyst firm IDC expects a decline of 2.7% for all of 2020.

Based on previous recessions that IDC has tracked, IT spending on hardware, software and IT services is likely to decline by more than real GDP, IDC said in a statement on Thursday.

The businesses that are hardest hit by the virus will react by delaying some IT purchases and projects, IDC said. “The lack of visibility related to medical factors will ensure that many organizations take an extremely cautious approach when it comes to budget contingency planning in the near term,” said Stephen Minton, a program vice president at IDC.

IDC reduced its 2020 forecast for real GDP growth to a negative 1.7% in March, down from 2.0 % in February, in line with many other economists. Meanwhile, IDC said in February that IT spending was expected to grow by 4.3% for all of 2020 but reduced that by 7 percentage points to negative 2.7% in March.

Even though some spending for WFH monitors and laptops has increased lately, IDC said spending declines for 2020 will be 8.8% across PCs, tablets, mobile phones and peripherals. “The crisis will significantly disrupt the smartphone market,” IDC said.

Despite strong demand for cloud purchases, spending on server/storage and network hardware will also decline overall.

“Hardware spending in general is always identified for rapid spending cuts during any economic crisis as a means for enterprises to quickly protect short-term profitability,” Minton said.

Meanwhile, the 8-week cumulative impact of COVID-19 on semiconductors indicates that unit shipments are down by more than 20% while prices are up by more than 20%, according to VLSI’s Coronavirus Semiconductor Market Watch.

VLSI also reported Thursday that data traffic for voice over IP and video conferencing is up 212%, while VPN traffic is up 40%, with a 38% increase in streaming and web video consumption.

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