Gartner forecasts govt IT spending to grow 8.4%

Research from Gartner has found that global government IT spending is forecast to total US$589.8 billion in 2023, an increase of 7.6% from 2022. The organisation predicts local government spending will reach almost AU$17 billion, an increase of 8.4% for the same period.

Growth rates in the software sector are predicted to slow slightly, but will still continue to follow an upward trend. Internal services and IT services are expected to maintain current growth rates while data centre systems look set to slow relative to 2022 numbers.

Segment	2022 spending	2022 growth	2023 spending	2023 growth
Data centre systems	502	13.1%	535	6.6%
Devices	648	-1.0%	669	3.1%
Internal services	2232	4.5%	2330	4.4%
IT services	6156	6.5%	6565	6.6%
Software	5399	19.1%	6152	14.0%
Telecom services	683	0.3%	687	0.7%
Total	15,621	9.8%	16,938	8.4%

“The current economic disruption and inflation pressures across Australia continue to increase prices, stall wages and keep the government focused on austerity, both at the state and federal levels,” said Dean Lacheca, VP analyst at Gartner.

“In response, the Victorian Government has just announced it will reduce its workforce by up to 4000 public servants, along with the federal government reducing its reliance on external IT contractors. This will see government increasingly look to digital investments, particularly automation, to drive efficiency opportunities and improve service delivery.”

Gartner said the same challenges are being felt globally.

“Global challenges like inflation and workforce scarcity and their local repercussions are testing the abilities of government CIOs to respond with appropriate service delivery mechanisms and organisational accountability,” said Apeksha Kaushik, Principal Analyst at Gartner.

“In addition, the ‘great resignation’ and the competing demand from the commercial sector have forced governments to re-examine their approaches to counterbalance internal talent scarcity.”

In 2023, government organisations will sustain commitment to investing in digital programs.

“Governments are increasingly spending their IT budgets to replace legacy applications. Gartner’s 2023 CIO and Technology Executive Survey showed that 57% of government CIOs plan to increase funding for application modernisation in 2023, up from 42% in 2022,” Kaushik said.

This year, they will also ensure their digital projects endure mission impact. An increasing number of government institutions are already putting in place at least one digital metric linked directly to outcomes associated with their organisation’s public purpose or mission. By 2026, Gartner foresees over 75% of governments will gauge digital transformation success by measuring the enduring mission impact.

To continue modernising and innovating critical IT infrastructure and applications, some government organisations will embrace a multisourced workforce strategy by optimising the use of internal IT talent and investing in employee experience tools to empower and spark innovation, as well as partnering with external IT service providers to speed time to value.

Throughout 2023, government organisations will continue to invest in initiatives that improve access to digital services as constituents increasingly demand experiences that are equivalent to online customers.

While digital transformation remains a top priority for governments, some government CIOs have indicated they are falling short in realising maximum benefits from their digital investments.

“Government CIOs who are moving beyond scaling digital solutions across their critical services are ensuring that further investment in digital solutions can directly impact how they achieve the mission or public purpose of their organisation,” Kaushik said.

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