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Govt IT spending on the rise, driven by XaaS - Gartner

By Catherine Knowles
Thu 16 Jun 2022

Worldwide government IT spending is forecast to total $565.7 billion in 2022, an increase of 5% from 2021, according to Gartner.

Notably, the analysts forecast XaaS will emerge as a new area of investments, as governments scale digital transformation initiatives.

Gartner director analyst Daniel Snyder says, “The last few years of enduring pandemic challenges have mobilised a wave of digital transformation activities in government organisations across the world.”

He adds, “Governments are executing innovative activities by harnessing technology to streamline digital services, advance automation processes and evolve citizen experiences.”

In 2022, government IT spending is forecast to increase across all segments except internal services and telecom services. Continuing the trend from 2021, software is forecast to record the strongest growth across all segments in 2022.

As legacy modernisation continues to be a priority in government organisations, growth in the data centre systems segment will continue to slow though the forecast period, Gartner states.

Governments continue to invest in critical application software that directly support end user interfaces driving strong growth in this segment. Spending on telecom services is set to decrease in 2022 as governments reduce spending on expensive legacy systems in favour of digital service delivery models.

Anything-as-a-Service (XaaS) is gaining popularity across government organisations as it provides better return on investment, normalising IT spend over time making budgeting for IT more predictable, while avoiding the accrual of technical debt. Gartner predicts that by 2026, most government agencies’ new IT investments will be made in XaaS solutions.

In addition, with the ongoing talent challenges facing organisations, XaaS makes it easier for government organisations to find the right talent via XaaS operating models, Gartner states.

XaaS delivery models require different internal IT skill sets and place less demand on the organisation to develop or acquire emerging IT skills, which are often hard to find and difficult for governments to afford.

On this trend Snyder adds, “The pandemic sped up public-sector adoption of cloud solutions and the XaaS model for accelerated legacy modernisation and new service implementations.

“54% of government CIOs responding to the 2022 Gartner CIO Survey indicated that they expect to allocate additional funding to cloud platforms in 2022, while 35% will decrease investments in legacy infrastructure and data centre technologies.”

Overall, in 2022, IT services are expected to account for the biggest spend accounting for $204.2 billion total, up 10.7% from 2021. This is followed by software at $162.2 billion, up 16.9% from the previous year.

Internal services and telecom services are expected to drop 2.1% and grow 1.1% respectively, hitting $68.1 billion, and $67.1 billion. Finally, devices are marked to grow a notable 13%, accounting for $37.8 billion of the total spend.

Gartner's findings also suggest that spending in 2023 will hit 606 billion, with software up another 12.8% and IT services 8.2%.

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