AI misses out on priority list as Gartner predicts Europe IT spend will top $1tn

Gartner analyst John-David Lovelock told CRN organisations won’t start using GenAI until 2025

IT spending in Europe is projected to total $1.1tn in 2024, an increase of 9.3 per cent from 2023, according to the latest forecast by Gartner.

The analyst house adds European IT spending is on pace to surpass $1tn by the end of 2023.

Within the five key areas of managed services - datacentre, application, customer product, network, workspace, service desk, Europe is expected to bring in $69.5bn in 2024, growing 6.9 per cent.

Despite it being the hot topic of the year and a priority for CIOs this year and next, AI is not yet a spending priority.

Gartner distinguished VP analyst John-David Lovelock told CRN that while it "doesn't get more hyped than AI", GenAI more specifically hasn't had the chance to get off the ground yet.

"The new generative AI hasn't really had the opportunity yet to earn money from enterprise," he said.

"2023 really was the year of the story. Organisations had the time to come up with the story of how generative AI is going to affect their product, industry, go-to-market, valuation, interaction with customers, wherever they felt they were getting the most bang for their storyline.

"2024 is going to be the year of the plan, where enterprises are actually working through the plan.

"2025 is when we're going to really start using generative AI."

Lovelock adds the use of AI is going to be split between what Gartner calls everyday AI and transformational AI.

New spending directed to cloud and cloud cybersecurity

Gartner predicts software and IT services to be the two segments where CIOs in Europe are expected to increase their spending the most in 2024.

Some of the growth in IT services is due to talent shortages in IT departments in Europe.

"There is a migration of IT skills away from the enterprise IT department toward technology and service providers (TSPs)," says Lovelock. "CIOs do not have the employees nor the talents to do all the work required and turn to IT services firms to fill in the gaps."

Gartner says inflation continues to impact consumer purchasing power, and while businesses and consumers are expected to increase their spending on devices in 2024, the level of IT spending on devices is not estimated to go back to 2021 levels until 2027.

In Europe, Austria, Ireland and Finland are projected to record the biggest bounce back in consumer spending in 2024.

While there is sufficient investment within datacentre markets to maintain the existing on-premises datacentres, new spending continues to skew toward cloud options, which is expected to grow 27 per cent in Europe in 2024.

European CIOs are also shifting their priorities internally, including enhancing cybersecurity spending in the cloud and planning for AI and GenAI.

"Cloud still gets a fair amount of the net new spending," says Lovelock, "incremental dollars do tend to skew towards cloud.

"Infrastructures as a service (IaaS), software as a service, platform as a service. These are all growth areas."

Lovelock adds IaaS is driving a large chunk of this growth owing to the presence of the hyperscalers in Europe.

"Now that the hyperscalers have set up in Europe there are infrastructures as a service platforms from hyperscale available in the country.

"So meeting the GDPR legislation, meeting in country data residency requirements, that's now a platform that technology providers can use and exploit to bring their products to market."