Gartner tech spending forecast tempered by price hikes
The global IT market is projected to grow 9.8% in 2025, but an expected increase in the prices of vendor products and services will eat into CIOs' tech budgets.
Gartner this week forecasted a nearly double-digit increase in global IT spending this year, but it said much of the uptick will stem from higher-than-expected prices for IT products and services.
The consulting and market research company's outlook is for tech spending to rise 9.8% year-over-year in 2025, to $5.61 trillion. However, the actual purchasing power of CIOs will not be as robust as the numbers indicate, since vendor price hikes will absorb a significant portion of their IT budgets, according to Gartner's forecast.
A Gartner survey of 200 CIOs revealed a consensus opinion that price increases are in the offing for 2025, said John-David Lovelock, research vice president at the company. The price increases are expected to span all spending categories, he added.
Jason Strle, CIO at credit card and financial services company Discover, also noted a general price increase. He said the price increases affect items such as cloud services and on-premises software.
"Everything is going up," Strle said.
IT inflation trends
The price of IT commodities such as servers, storage and cloud computing services have increased in recent years, amid a general inflationary trend that started in 2021. The SaaS sector is an example: Nearly 75% of vendors raised their prices in 2022 and 2023, while 55% of vendors did so in 2024 as inflation stabilized somewhat, according to Vertice, which tracks pricing in its SaaS Inflation Index. Vertice, with head offices in London and New York, offers SaaS and cloud spend optimization products.
However, the percentage of vendors increasing their prices edged up to 58% thus far in January, Vertice reported. Eldar Tuvey, Vertice's CEO and founder, said the company is starting to see slightly more vendors increasing their prices, even though Consumer Price Index inflation is less of an issue.
Tuvey suggested that vendors eager to add more upgrades and features to "compete and increase stickiness" of their services might be driving up package prices. That trend is particularly prevalent around AI, he noted.
Price increases come with upgrades
While CIOs can anticipate spending more for the IT staples they routinely purchase from vendors, there's a bit of silver lining.
"Many of the things with price increases also have feature-function expansion," Lovelock said. He cited the example of a supplier adding a generative AI component to its core product.
Strle also pointed to the arrival of new features as a benefit, especially in the cloud. He said millions of cloud platform customers are regularly asking vendors to refine their services.
"Everyone is benefiting from that pressure," he said.
While cloud customers benefit from continual updates, enterprises leasing a data center or managing their own facility will find it "more and more challenging to compete with that pace of innovation," Strle said.
