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GenAI ‘resembles a tax’ for software vendors – Gartner

But GenAI will help fuel 24% boom in 2024 datacentre system sales, analyst claims

Oxygen staff by Oxygen staff
17 July 2024
in Market data, News
GenAI ‘resembles a tax’ for software vendors – Gartner
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GenAI will fuel a 24% boom in datacentre system sales in 2024 but “most closely resembles a tax” for software vendors, Gartner has claimed.

The market watcher expects global IT spending to hike 7.5% to $5.26tn this year.

That’s down on the 8% growth it forecast in April, but well up on the 3.8% growth the market experienced in 2023.

Gartner expects datacentre systems spending to skyrocket 24% to $293bn – “due in large part to increased planning for GenAI”.

That is substantially up on the 10% growth it predicted for the segment in April.

The analyst did, however, revise downwards its growth forecasts for software and IT services, from 13.9% to 12.6% and from 9.7% to 7.1%, respectively.

Gartner Distinguished VP Analyst John-David Lovelock said that GenAI is “being felt across all technology segments and subsegments, but not to everyone’s benefit”.

“Some software spending increases are attributable to GenAI, but to a software company, GenAI most closely resembles a tax,” he said.

“Revenue gains from the sale of GenAI add-ons or tokens flow back to their AI model provider partner.”

Gartner stressed its IT spending forecast methodology draws on analysis of the sales of “over a thousand vendors”.

2024 IT services spending growth will not be as high as it forecast three months ago due in part to slower spending across subsegments that include consulting and business process services, it noted.

“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. 

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