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Questions raised as to whether US government agencies can implement zero trust policies in short-term

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75% of U.S. federal agencies will fail to implement zero trust security policies by 2026 due to funding and expertise shortfalls.

That’s according to Gartner, which defines zero trust as a security paradigm that starts from the baseline of trusting no end user, and explicitly identifies users and grants them the precise level of access necessary to accomplish their task.

Zero trust is not a specific technology, product or service. Instead, it is a set of security design principles that contrasts with the traditional perimeter-based security approach.

“With the September 2024 deadline for specific zero trust requirements for U.S. federal agenciesbeing established, requirements are broad for all agencies,” said Mike Brown, Vice President Analyst at Gartner. “However, consistent with other compliance deadlines, agencies will struggle to meet these goals. Given the typical delays for Congressional passage of the federal budget, funds will likely not be available for the zero trust initiative until the second quarter of fiscal 2024, allowing only a partial year to achieve goals.”

Although zero trust achievements, or lack thereof, may be captured in audits, public reporting on specific details of zero trust progress may be limited or obfuscated. This is to avoid identifying weaker aspects of government cybersecurity for the benefit of malicious actors.

“One of the main impediments for government agencies in their zero trust journey is a cybersecurity skills shortage,” said Brown.” Government agencies are challenged to compete with the private sector for staff with necessary skills. To address these talent shortages, agencies should be working simultaneously with service contracts, to reskill existing staff and to recruit new staff.”

Failure to meet policy deadlines will continue to leave federal agencies exposed to risks that could be mitigated.

“This could lead to the interruption of vital government services or the compromise of sensitive information, both of which would have a significant fiscal impact on resolving what could be prevented,” said Brown. “Security breaches will occur as even the best cybersecurityimplementations are not immune. Still, those agencies and their CIOs who fail to fully and promptly adopt zero trust measures will be subject to the most negative scrutiny. A breach often catalyzes the focus and investment in mitigation, which is a predictable need.”

Learn how to implement zero trust security in the public sector in the complimentary Gartner Zero Trust Toolkit.

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Are these the top cybersecurity trends for 2024?

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Generative AI (GenAI), unsecure employee behaviour, third-party risks, continuous threat exposure, boardroom communication gaps and identity-first approaches to security are the driving forces behind the top cybersecurity trends for 2024, according to Gartner.

“GenAI is occupying significant headspace of security leaders as another challenge to manage, but also offers an opportunity to harness its capabilities to augment security at an operational level,” said Richard Addiscott, Senior Director Analyst at Gartner. “Despite GenAI’s inescapable force, leaders also continue to contend with other external factors outside their control they shouldn’t ignore this year.”

2024 will see security leaders respond to the combined impact of these forces by adopting a range of practices, technical capabilities and structural reforms within their security programs, with a view to improving organizational resilience and the cybersecurity function’s performance.

The following six trends will have broad impact across these areas:

Trend 1: Generative AI – Short-term Skepticism, Longer-Term Hope
Security leaders need to prepare for the swift evolution of GenAI, as large language model (LLM) applications like ChatGPT and Gemini are only the start of its disruption. Simultaneously, these leaders are inundated with promises of productivity increases, skills gap reductions and other new benefits for cybersecurity. Gartner recommends using GenAI through proactive collaboration with business stakeholders to support the foundations for the ethical, safe and secure use of this disruptive technology.

“It’s important to recognize that this is only the beginning of GenAI’s evolution, with many of the demos we’ve seen in security operations and application security showing real promise,” said Addiscott. “There’s solid long-term hope for the technology, but right now we’re more likely to experience prompt fatigue than two-digit productivity growth. Things will improve, so encourage experiments and manage expectations, especially outside of the security team.”

Trend 2: Cybersecurity Outcome-Driven Metrics: Bridging Boardroom Communication Gap
The frequency and negative impact of cybersecurity incidents on organizations continues to rise, undermining the confidence of the board and executives in their cybersecurity strategies. Outcome-driven metrics (ODMs) are increasingly being adopted to enable stakeholders to draw a straight line between cybersecurity investment and the delivered protection levels it generates.

According to Gartner, ODMs are central to creating a defensible cybersecurity investment strategy, reflecting agreed protection levels with powerful properties, and in simple language that is explainable to non-IT executives. This provides a credible and defensible expression of risk appetite that supports direct investment to change protection levels.

Trend 3: Security Behavior and Culture Programs Gain Increasing Traction to Reduce Human Risks
Security leaders recognize that shifting focus from increasing awareness to fostering behavioral change will help reduce cybersecurity risks. By 2027, 50% of large enterprise CISOs will have adopted human-centric security design practices to minimize cybersecurity-induced friction and maximize control adoption. Security behavior and culture programs (SBCPs) encapsulate an enterprisewide approach to minimizing cybersecurity incidents associated with employee behavior.

“Organizations using SBCPs have experienced better employee adoption of security controls; reductions in unsecure behavior and increases in speed and agility,” said Addiscott. “It also leads to a more effective use of cybersecurity resources as employees become competent at making independent cyber risk decisions.”

Trend 4: Resilience-Driven, Resource-Efficient Third-Party Cybersecurity Risk Management
The inevitability of third parties experiencing cybersecurity incidents is pressuring security leaders to focus more on resilience-oriented investments and move away from front loaded due diligence activities. Gartner recommends security leaders enhance risk management of third-party services and establish mutually beneficial relationships with important external partners, to ensure their most valuable assets are continuously safeguarded.

“Start by strengthening contingency plans for third-party engagements that pose the highest cybersecurity risk,” said Addiscott. ”Create third-party-specific incident playbooks, conduct tabletop exercises and define a clear offboarding strategy involving, for example, timely revocation of access and destruction of data.”

Trend 5: Continuous Threat Exposure Management Programs Gain Momentum
Continuous threat exposure management (CTEM) is a pragmatic and systemic approach organizations can use to continually evaluate the accessibility, exposure and exploitability of digital and physical assets. Aligning assessment and remediation scopes with threat vectors or business projects rather than an infrastructure component, highlights vulnerabilities and unpatchable threats.

By 2026, Gartner predicts that organizations prioritizing their security investments based on a CTEM program will realize a two-thirds reduction in breaches. Security leaders must continuously monitor hybrid digital environments to enable early identification and optimal prioritization of vulnerabilities to help maintain a hardened organizational attack surface.

Trend 6: Extending the Role of Identity & Access Management (IAM) to Improve Cybersecurity Outcomes
As more organization’s move to an identity-first approach to security, the focus shifts from network security and other traditional controls to IAM, making it critical to cybersecurity and business outcomes. While Gartner sees an increased role for IAM in security programs, practices must evolve to focus more on fundamental hygiene and hardening of systems to improve resilience.

Gartner recommends security leaders focus on strengthening and leveraging their identity fabric and leverage identity threat detection and response to ensure IAM capabilities are best positioned to support the breadth of the overall security program.

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These are the top trends impacting tech providers in 2024

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Generative AI (GenAI) is dominating the technical and product agenda of nearly every tech provider, but ESG and buyer pessimism are also high on the agenda.

Eric Hunter, Managing Vice President at Gartner, said: “[GenAI] technology reshapes a tech provider from its growth and product strategy down to the everyday tools used by its associates. Despite the potential for GenAI to reshape providers, it is not the only influence facing technology leaders. There are new points of friction in growth plans, new points of fusion in marketing and sales, and new relationships opening up to technology and service providers (TSPs).”

The immediate and long-term implications of these issues require product leaders to balance between short-term opportunity and long-term advantage and strategies based on economic recovery or recession. Gartner’s top trends for 2024 reflect these dualities (see Figure 1).

Figure 1: 2024 Gartner Tech Provider Top Trends

Note: The bubble size for each trend conveys the relative magnitude of disruption for a given trend, relative to the other top trends. Source: Gartner (February 2024)

Efficient Growth for High Tech

Significant growth in IT spending over the last decade benefited high-tech companies. Capturing that growth led high-tech firms to pursue growth without a full measure of the costs. This is a “growth at all costs” strategy. High-tech firms anchored their product, organization and employment plans on a hypothesis of continued strong growth.

As macroeconomic conditions create uncertainty among buyers and increasing costs of capital shift investor focus to margin growth, Gartner analysts see a trend toward tech providers focusing on efficient growth. Efficient growth strategies recognize the value in growing in ways that strengthen current margins and future revenue opportunities.

New Enterprise IT-Provider Relationships

Increased business and technical demands require enterprise IT to cover more ground at a deeper level and a faster pace, eroding enterprise IT’s capacity and capabilities. This creates a trend for product leaders at tech providers to create new relationships and revenue opportunities across the enterprise, including expanded provider roles within enterprise IT and the business, outcome-centric provider-enterprise relationships and enterprise-wide tier-1 relationships.

Sustainable Business Grows Up

Sustainability efforts and managing the ESG impact have been unilaterally focused on mitigating internal risk and ensuring compliance. Product leaders must evolve by embracing double materiality and holistic leverage of emerging technologies to meet sustainability objectives.

AI Safety 

Responsible AI and AI safety are not new concepts, but the unprecedented rapid development of GenAI technologies has fueled the discussion around risk management and how to address growing issues such as content provenance and hallucination. Product leaders must build solutions that incorporate safety principles with a focus on model transparency, traceability, interpretability and explainability aspects. Preempting regulatory and compliance issues will be critical to staying competitive in this vibrant GenAI market by creating trust.

Rising Buyer Pessimism 

Over the past three years, tech providers have increasingly observed negative sales pipeline effects due to new buyer behaviors that are colliding with outdated go-to-market (GTM) models. Without adapting sales and marketing approaches to detect and respond to buyer pessimism, technology providers will see their own GTM operations decline in both internal and external perspectives.

Vertical Generative AI Models

While general-purpose models perform well across a broad set of GenAI applications, they can be impractical for many enterprise use cases that require domain-specific data. Tech providers must explore industry-focused models that can be adapted to specific user requirements using available resources more efficiently. Those failing to do so will face increased costs and complexity in the creation and leverage of models.

Personalized Marketplace Experiences  

Specialized, niche, digital marketplaces are emerging to help buyers navigate the complexity of procuring, implementing and integrating solutions. Product leaders who do not offer their services through personalized digital marketplaces limit their findability for their target customers. Gartner predicts that

80% of sales interactions between suppliers and buyers will occur in digital channels by 2025.

Industry Cloud Delivers Growth

Service providers, hyperscalers, ISVs and SaaS providers are turning to vertical solutions to deliver the customer outcomes that will drive provider growth. By 2027, Gartner predicts that more than 50% of tech providers will use industry cloud platforms to deliver business outcomes, up from less than 5% in 2023.

PLG and Value Converge for Hybrid GTM

Product-led-growth (PLG) focuses on showing value to product users, creating intent signals that go-to-market (GTM) teams can use with prospective buyers. But most companies using a PLG GTM have begun to realize that, in most cases, a 100% self-serve GTM motion isn’t tenable. At some point, sellers must be involved to convert deals. Buyer needs for business value and outcome justification — for new or expansion business — will meld PLG tactics with value management and realization initiatives in hybrid GTM strategies.

Precision Marketing and Sales

Rapidly evolving technology advances, such as GenAI, digital buying and the metaverse, are changing how tech providers market and sell technology. Tech providers failing to adopt new approaches will see the erosion of overall deal quality combined with the loss of relevance and limited growth within established accounts.

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IT Services will be largest recipient of CIO spending in 2024

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Global IT spending is expected to total $5 trillion in 2024, an increase of 6.8% from 2023, down from the previous quarter’s forecast of 8% growth – and while generative AI (GenAI) had significant hype in 2023, it will not significantly change the growth of IT spending in the near-term.

That’s according to new analysis from Gartner, which predicts that IT Services will become largest segment of spending in this year.

“While GenAI will change everything, it won’t impact IT spending significantly, similar to IoT, blockchain and other big trends we have experienced,” said John-David Lovelock, Distinguished VP Analyst at Gartner. “2024 will be the year when organizations actually invest in planning for how to use GenAI, however IT spending will be driven by more traditional forces, such as profitability, labor, and dragged down by a continued wave of change fatigue.”

IT services will continue to see an increase in growth in 2024, becoming the largest segment of IT spending for the first time. Spending on IT services is expected to grow 8.7% in 2024, reaching $1.5 trillion (see Table 1). This is largely due to enterprises investing in organizational efficiency and optimization projects. These investments will be crucial during this period of economic uncertainty.

“Adoption rates among consumers for devices and communications services plateaued over a decade ago. Consumer spending levels are primarily driven by price changes and replacement cycles, leaving room for only incremental growths, so being surpassed by software and services was inevitable,” said Lovelock. “Enterprises continue to find more uses for technology – IT has moved out of the back office, through the front office and is now revenue producing, until there is a plateau for how and where technology can be used in an enterprise, there cannot be a plateau in enterprise IT spending.”

Table 1. Worldwide IT Spending Forecast (Millions of U.S. Dollars) 

  2023 Spending 2023 Growth (%) 2024 Spending 2024 Growth (%)
Data Center Systems 243,063 7.1 261,332 7.5
Software 699,791 -8.7 732,287 4.6
Devices 913,334 12.4 1,029,421 12.7
IT Services 1,381,832 5.8 1,501,365 8.7
Communications Services 1,440,827 1.5 1,473,314 2.3
Overall IT 4,678,847 3.3 4,997,718 6.8

Source: Gartner (January 2024)

The overall IT spending growth rate for 2023 was 3.3%, only a 0.3% increase from 2022. This was largely due to change fatigue among CIOs. Momentum will regain in 2024, with overall IT spending increasing 6.8%.

Even with the expected regained momentum in 2024, the broader IT spending environment remains slightly constrained by change fatigue. Change fatigue could manifest as change resistance — with CIOs hesitating to sign new contracts, commit to long-term initiatives or take on new technology partners. For the new initiatives that do get launched, CIOs require higher levels of risk mitigation and greater certainty of outcomes.

Nearly half of EMEA CIOs are shifting to co-owning digital leadership with their CxO peers

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Forty-six per cent of CIOs in Europe, the Middle East and Africa (EMEA) are partnering with their CxO peers to bring IT and business area staff together to co-own digital delivery on an enterprise-wide scale.

That’s according to Gartner’s annual global survey of CIOs and technology executives, which has found that CIO’s relationship with their CxO peers is ‘reaching a different level’.

Daniel Sanchez-Reina, VP Analyst at Gartner, said: “CIOs who co-own efforts with their CxO peers to place the design, management and delivery of digital capabilities with teams closest to the point where value is created, are most effective at maximising digital investments.”

In this CIO-CxO co-ownership, also called democratization of digital delivery, the CIO acts as a franchiser of technology within their organization.

Gartner analysts presented the survey findings during Gartner IT Symposium/Xpo, taking place here through Thursday. The 2024 Gartner CIO and Technology Executive Survey gathered data from 2,457 CIO respondents in 84 countries and all major industries, representing approximately $12.5 trillion in revenue/public-sector budgets and $163 billion in IT spending. In EMEA, 917 CIOs participated in the survey, representing nearly $3.9 trillion in revenue and $66 billion in IT spending.

“Consciously or unconsciously, CIOs have already been laying the foundation for democratized digital delivery with technologies such as low-code platforms,” said Sanchez-Reina. In EMEA, 66% of CIOs said they have deployed or plan to deploy low-code platforms in the next 24 months. Artificial intelligence (AI), which 72% of EMEA CIOs say will be a game-changing technology in the next three years (29% for generative AI), will also rapidly advance the democratization of digital delivery beyond the IT function.

The survey revealed that CIOs’ top areas for investment in 2024 include cybersecurity, data analytics and AI (see Figure 1).

Figure 1. EMEA CIOs’ Expected Change in Technology Investments in 2024

Source: Gartner (November 2023)

CIOs who franchise IT ‘by design’, which is through co-leading, co-delivering and co-governing digital initiatives with their CxO peers, perform significantly better at general IT management activities, such as executive leadership development and digital business strategy.

“Franchiser CIOs are breaking down the barriers of IT, allowing other business units to produce IT beyond using it,” said Sanchez-Reina. “Those business units participate in the IT delivery responsibility and are accountable for the success of their own IT applications and systems they produce. Such participation in technology production goes from managing to implementing and building technology initiatives.

“This shows that the distinction between what is “IT” and what is “business” is becoming virtually impossible.”

There is no one pattern for franchised digital delivery. Several factors such as the enterprise culture and CEO sponsorship will influence the design and inner workings of the franchise model and the ways in which CIOs and their CxO peers engage. Above all, the CIO must coach their business partners on the journey, offering advice and frameworks, and brokering the internal and external connections they need to successfully co-own digital delivery.

“The payoff of modeling CxO-CIO partnerships for digital delivery on a franchise model is substantial,” said Sanchez-Reina. “CxOs who embrace this franchise model are twice as likely to meet or exceed expectations from digital investments, compared with those who don’t embrace it.”

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Global IT spending set to hit $4.7 trillion in 2023, driven by automation

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Global IT spending is projected to grow by 4.3% this year to reach $4.7 trillion, with CIOs continuing to lose the competition for IT talent, leading to a shift in spending towards technologies that enable automation and efficiency to drive growth with fewer employees.

“Digital business transformations are beginning to morph,” said John-David Lovelock, Distinguished VP Analyst at Gartner. “IT projects are shifting from a focus on external facing deliverables such as revenue and customer experience, to more inward facing efforts focused on optimization.”

The software segment will see double-digit growth in 2023 as organizations increase utilization and reallocate spending to core applications and platforms that support efficiency gains, such as enterprise resource planning (ERP) and customer relationship management (CRM) applications. Vendor price increases will also continue to bolster software spending through this year.

While the overall outlook for enterprise IT spending is positive, devices spending will decline 8.6% in 2023 due to the ongoing impact of inflation on consumer purchasing power (see Table 1).

Table 1. Worldwide IT Spending Forecast (Millions of U.S. Dollars)

  2022 Spending 2022 Growth (%) 2023 Spending 2023 Growth (%) 2024 Spending 2024 Growth (%)
Data Center Systems 221,223 16.6 217,880 -1.5 235,530 8.1
Devices 766,279 -6.3 700,023 -8.6 748,150 6.9
Software 803,335 10.3 911,663 13.5 1,039,175 14.0
IT Services 1,305,699 7.5 1,420,905 8.8 1,585,373 11.6
Communications Services 1,423,075 -1.9 1,461,662 2.7 1,517,877 3.8
Overall IT 4,519,610 2.7 4,712,133 4.3 5,126,105 8.8

Source: Gartner (July 2023)

“The devices segment is experiencing one of its worst growth years on record,” said Lovelock. “Even as inflation eases slightly in some regions, macroeconomic factors are still negatively impacting discretionary spending and lengthening device refresh cycles. Devices spending is not expected to recover to 2021 levels until at least 2026.”

While generative artificial intelligence (AI) is top of mind for many business and IT leaders, it is not yet significantly impacting IT spending levels. In the longer-term, generative AI will primarily be incorporated into enterprises through existing spending.

“Generative AI’s best channel to market is through the software, hardware and services that organizations are already using,” said Lovelock. “Every year, new features are added to tech products and services as add-ons or upgrades. Most enterprises will incorporate generative AI in a slow and controlled manner through upgrades to tools that are already built into IT budgets.”

“When it comes to AI this year, organizations can thrive without having AI in production but they cannot be without a story and a strategy,” added Lovelock.

Amazon drives IaaS market to new highs

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The worldwide infrastructure as a service (IaaS) market grew 29.7% in 2022, to total $120.3 billion, up from $92.8 billion in 2021, according to new data.

Analysis by Gartner indicates Amazon retained the No. 1 position in the IaaS market in 2022, followed by Microsoft, Alibaba, Google and Huawei.

“Cloud has been elevated from a technology disruptor to a business disruptor,” said Sid Nag, VP Analyst at Gartner. “IaaS is driving software-as-a-service (SaaS) and platform-as-a-service (PaaS) growth as buyers to continue to add more applications to the cloud and modernize existing ones.”

“IaaS growth in 2022 was stronger than expected, despite a slight softening in the fourth quarter as customers focused on using their previously committed capacity to its fullest potential,” added Nag. “This is expected to continue until mid-2023 and is a natural outcome of the market’s maturity. We expect an acceleration in 2024, as there is still room for plenty of additional future growth.”

In 2022, the top five IaaS providers accounted for over 80% of the market. Amazon continued to lead the worldwide IaaS market with revenue of $48.1 billion and 40% market share (see Table 1).

Table 1. Worldwide IaaS Public Cloud Services Market Share, 2021-2022 (Millions of U.S. Dollars)

Company 2022
Revenue		 2022 Market
Share (%)		 2021
Revenue		 2021 Market
Share (%)		 2021-2022
Growth (%)
Amazon 48,126 40.0 35,380 38.1 36.0
Microsoft 25,858 21.5 19,153 20.6 35.0
Alibaba Group 9,281 7.7 9,060 9.8 2.4
Google 9,072 7.5 6,433 6.9 41.0
Huawei 5,249 4.4 4,190 4.5 25.3
Others 22,746 18.9 18,565 20.0 22.5
Total 120,333 100 92,782 100 29.7

Source: Gartner (July 2023)

Microsoft followed in the No. 2 position with 21.5% share, reaching over $25 billion in IaaS public cloud revenue in 2022. Microsoft’s software-first strategy continued to support its IaaS growth as customers required more cloud capacity to support automation, advanced analytics and digital workplace capabilities.

Alibaba Group again held the No. 3 position with 7.7% market share, although with modest 2.4% year over year growth. While Alibaba continued to lead the IaaS market in China, its limited potential for expansion across global markets has slowed growth, driving its recent decision to spin off its Alibaba Cloud business into a separate entity.

Google saw the highest growth rate of the top five IaaS vendors, growing 41% in 2022 to reach over $9 billion in revenue. Google’s increased investment in sovereign cloud and expanded sales and marketing partner programs helped to broaden its customer base and drive additional IaaS revenue.

Huawei rounded out the top five IaaS vendors with 4.4% market share and $5.2 billion in revenue for 2022. Since its 2020 pivot to an increased focus on cloud, Huawei has been steadily growing its IaaS revenue in China and emerging markets.

“Generative AI will continue to drive the cloud market forward, particularly as hyperscalers look to support offerings beyond the existing, democratized generative AI solutions,” said Nag. “As enterprises integrate generative AI into their technology portfolio, new markets and opportunities for cloud hyperscalers will emerge related to sovereignty, ethics, privacy and sustainability.”

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Banking and investment sector IT spending to hit $652bn this year

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Worldwide banking and investment services IT spending is forecast to total $652.1 billion in 2023, an increase of 8.1% from 2022, with software experiencing the largest growth with an increase of 13.5%.

“Current economic headwinds have changed the context for technology investments in banking and investment services this year,” said Debbie Buckland, Director Analyst at Gartner. “Rather than cutting IT budgets, organizations are spending more on the types of technologies that generate significantly higher business outcomes. Spending on software, for example, is shifting away from building it in-house, in favor of buying solutions that generate value from investments more rapidly.”

According to the Gartner 2023 CIO and Technology Executive Survey, banking and investment services CIOs will spend the largest amount of new or additional funding in 2023 on cybersecurity, data and analytics, integration technologies and cloud.

More than half plan to increase investments in cloud, while reducing IT spending in their own data centers. This is reflected by slower growth in data center systems spending from 13.2% in 2022 to 5.7% in 2023 (see Table 1). Banks are disengaging from tangible assets and capital expenditure (capex) in favor of adopting services and operating expenditure (opex), to meet evolving customer and market expectations.

Table 1. Worldwide Banking and Investment Services IT Spending Forecast (Millions of U.S. Dollars)

  2022 Spending 2022
Growth (%)		 2023 Spending 2023
Growth (%)
Data Center Systems 34,467 13.2 36,433 5.7
Devices 37,961 -9.9 37,149 -2.1
Internal Services 52,933 -2.2 55,156 4.2
IT Services 246,698 5.2 269,735 9.3
Software 153,268 11.2 174,014 13.5
Telecom Services 77,736 -2.9 79,599 2.4
Total 603,063 4.1 652,086 8.1

Source: Gartner (June 2023)

“To deal with the current economic climate, banking and investment services CIOs are now prioritizing more conservative objectives that support resilient and sustainable growth, such as a better customer experience (CX) and more efficient operations,” said Pete Redshaw, VP Analyst at Gartner. “This is a change from previous years when outright growth – new territories, new customers, new lines of business – was the primary objective of banking CEOs.”

Driven by the increased use of consulting services and infrastructure as a service (IaaS), IT services will be the largest spending category, forecast to reach almost $270 billion in 2023. This is an increase of 9.3% over 2022, reflecting the increasingly important role IT service providers play in helping banking and investment services organizations navigate emerging opportunities and challenges.

“Economic uncertainty is leading organizations to break down long-term contracts into multiple shorter projects,” said Buckland. “They’re also reluctant to sign new contracts, commit to long-term initiatives or take on new technology partners, which is driving an increase in the use of IT consulting services.”

With the global talent shortage impacting banking and investment services organizations, spending on internal services will increase by 4.2% in 2023 to support the increased costs of hiring and retaining talent.

“Even after the recent widespread redundancies at many of the technology giants, banks are no longer seen automatically by top talent as the most desirable, rewarding or stimulating destinations,” said Redshaw. “More innovative solutions are needed, such as dropping the requirement for university education and adding benefits such as lifetime retraining, hybrid teams, agile methods and fintech partnerships.”

Government CIO spending on IT predicted to grow 8% in 2023

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Worldwide government IT spending is forecast to total $589.8 billion in 2023, an increase of 7.6% from 2022, with inflation and skills shortages among the top considerations fort CIOs.

That’s according to research from Gartner, which says that 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 organization’s public purpose or mission.

By 2026, Gartner foresees over 75% of governments will gauge digital transformation success by measuring the enduring mission impact.

“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 organizational 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.

“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,”

Software to Remain Highest Spending Segment in 2023

In 2023, software will continue to be the highest growing segment in 2023 (see Table 1). Application modernization investments will increase supported by more software-as-a service-based solution offerings. The use of low-code application platforms (LCAPs) is also on the rise and will further accelerate legacy modernization efforts.

Table 1. Worldwide Government IT Spending Forecast (Millions of U.S. Dollars)

Segment 2022 Spending 2022 Growth (%) 2023 Spending 2023 Growth (%)
Data Center Systems 25,760 11.1 26,623 3.3
Devices 34,224 -8.7 32,643 -4.6
Internal Services 66,940 -2.3 69,178 3.3
IT Services 191,958 3.4 209,103 8.9
Software 161,894 10.0 183,733 13.5
Telecom Services 67,583 -4.9 68,514 1.4
Total 548,359 2.9 589,794 7.6

Source: Gartner (May 2023)

Government spending on IT services will continue unabatedly in 2023. “Compensation constraints and limited resources to attract and retain IT talent is becoming an even bigger challenge today as many governments are facing IT talent shortage,” said Kaushik.

To continue modernizing and innovating critical IT infrastructure and applications, some government organizations will embrace a multisourced workforce strategy by optimizing 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 organizations 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 realizing 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 organization,” said Kaushik.

Worldwide public cloud end-user spending to hit $600bn in 2023

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Worldwide end-user spending on public cloud services is forecast to grow 21.7% to total $597.3 billion in 2023, up from $491 billion in 2022, according to the latest forecast from Gartner.

Cloud computing is driving the next phase of digital business, as organizations pursue disruption through emerging technologies like generative artificial intelligence (AI), Web3 and the metaverse.

“Hyperscale cloud providers are driving the cloud agenda,” said Sid Nag, Vice President Analyst at Gartner. “Organizations today view cloud as a highly strategic platform for digital transformation, which is requiring cloud providers to offer more sophisticated capabilities as the competition for digital services heats up.”

“For example, generative AI is supported by large language models (LLMs), which require powerful and highly scalable computing capabilities to process data in real-time,” added Nag. “Cloud offers the perfect solution and platform. It is no coincidence that the key players in the generative AI race are cloud hyperscalers.”

All segments of the cloud market are expected see growth in 2023. Infrastructure-as-a-service (IaaS) is forecast to experience the highest end-user spending growth in 2023 at 30.9%, followed by platform-as-a-service (PaaS) at 24.1% (see Table 1).

Table 1. Worldwide Public Cloud Services End-User Spending Forecast (Millions of U.S. Dollars)

  2022 2023 2024
Cloud Application Infrastructure Services (PaaS) 111,976 138,962 170,355
Cloud Application Services (SaaS) 167,342 197,288 232,296
Cloud Business Process Services (BPaaS) 59,861 65,240 71,063
Cloud Desktop-as-a-Service (DaaS) 2,525 3,122 3,535
Cloud Management and Security Services 34,487 42,401 51,871
Cloud System Infrastructure Services (IaaS) 114,786 150,310 195,446
Total Market 490,977 597,325 724,566

BPaaS = business process as a service; IaaS = infrastructure as a service; PaaS = platform as a service; SaaS = software as a service
Note: Totals may not add up due to rounding.
Source: Gartner (April 2023)

Gartner predicts that by 2026, 75% of organizations will adopt a digital transformation model predicated on cloud as the fundamental underlying platform.

“The next phase of IaaS growth will be driven by customer experience, digital and business outcomes and the virtual-first world,” said Nag. “Emerging technologies that help businesses interact more closely and in real time with their customers, such as chatbots and digital twins, are reliant upon cloud infrastructure and platform services to meet growing demands for compute and storage power.”

While cloud infrastructure and platform services are driving the highest spending growth, SaaS remains the largest segment of the cloud market by end-user spending. SaaS spending is projected to grow 17.9% to total $197 billion in 2023.

“The technology substrate of cloud computing is firmly dominated by the hyperscalers, but leadership of the business application layer is more fragmented,” said Nag. “Providers are facing demands to redesign SaaS offerings for increased productivity, leveraging cloud-native capabilities, embedded AI and composability – particularly as budgets are increasingly driven and owned by business technologists. This change will ignite a wave of innovation and replacement in the cloud platform and application markets.”

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